BofA Merrill Lynch to pay $2.5 mln in FINRA matter

CHARLOTTE, North Carolina (Reuters) - Bank of America Merrill Lynch will pay $2.5 million in restitution and fines after it failed to provide discounts to customers on a type of securities sale, the brokerage industry's primary regulator said on Wednesday.

The Financial Industry Regulatory Authority fined Merrill Lynch $500,000, and the brokerage will pay $2 million in restitution to customers who did not receive so-called "sales charge discounts" on unit investment trusts.

"In this case, it was critical for the firm to ensure that its brokers were diligent in providing sales charge discounts to which customers were entitled," James Shorris, FINRA's acting chief of enforcement, said in a prepared statement. "This failure resulted in increased investment costs to Merrill's customers."

A Bank of America spokesman said the company was pleased to resolve the matter and was working to quickly provide restitution to customers.

A unit investment trust is a type of investment company that holds a fixed portfolio of securities and offers redeemable units of that portfolio that terminate after a specified period of time.

Unit investment trust sponsors typically provide discounts for large purchases of the redeemable units. The discounts increase as more of the securities are purchased.

Further discounts can come for investors who roll the proceeds from one investment trust securities sale into purchasing another unit investment trust.

Since March 31, 2004, brokerages have needed to develop policies and procedures to ensure customers receive the proper discounts, FINRA said.

Before May 2008, FINRA said, Merrill Lynch failed to provide guidance on such discounts to brokers or their supervisors, and failed to notify clients when they were eligible for such discounts.

Investors who purchased the securities from January 2006 through the present will receive restitution, FINRA said.

In settling with the regulator, Merrill Lynch did not admit or deny the FINRA allegations.

(Reporting by Joe Rauch; Editing by Steve Orlofsky and John Wallace)

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