Regulatory Woes
Welcome to FundFire's Weekly News Brief.
Merrill Lynch will have to pony up $3 million to settle Financial Industry Regulatory Authority allegations over lax monitoring systems.
The regulator last week said the Bank of America wirehouse didn't implement a "reasonably designed" supervisory system to detect potentially manipulative trading for more than eight years, starting at end of 2015.
Instead, the agency said Merrill used automated surveillance systems from a third party that were unable to catch wrongdoing. Read more here about Finra's enforcement action.
Smaller shops have also gotten into regulatory hot water recently. The Securities and Exchange Commission slapped $82 million registered investment adviser Cedar Legacy with a $75,000 civil penalty for allegedly violating custody and compliance rules. Investment advisors that custody client assets are required to ensure that an independent public accountant audits client funds every year, and need to promptly update audit details on their Form ADV. Associate Editor Tony Rifilato reported details on the SEC's investigation here.
Even a whiff of an enforcement action can cause firms to lose business. The investment committee of the $12 billion Chicago Teachers' Pension Fund has recommended terminating a $550 million mandate with Western Asset Management, Senior Reporter Justin Mitchell reported last week. Western recently put its co-CIO, Ken Leech, on leave after learning of a potential regulatory action. Morningstar also put all the manager's strategies under review. The SEC is probing trade allocations involving Treasury derivatives in some of the Franklin Templeton affiliate's managed accounts.
Chart of the Week
Asset managers are dropping mentions of environmental, social and governance factors, with fewer firms saying they consider those criteria in their investment process, FundFire's Michael Taffe reported. Click here or on the chart below to read more.
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