Merrill Lynch Conflict Case | Jacko Law Group, PC

Failure to properly disclose conflicts of interest and failure to properly discharge a firm's fiduciary duties -can result in costly penalties. In a one such case, Merrill Lynch, Pierce, Fenner & Smith ("Merrill") recently agreed to an $8.9 million settlement with the U.S. Securities and Exchange Commission ("SEC"). The firm was charged with failure to disclose a conflict of interest in which its own business interests improperly influenced decisions of whether to continue offering its clients products managed and offered by an outside third-party advisory firm.

Conflict of Interest and Breaking from Standard Procedure

According to the SEC, the third-party manager contacted Merrill executives in an attempt to persuade them not to terminate specific product offerings by appealing to its "overall business relationship" with Merrill and a break in ordinary practices soon followed. As a result, the governing committee at Merrill broke from its customary procedures by deferring a vote on termination of the third-party services. The hold on those services, which was placed due to management changes at the third-party, was later lifted, and the third-party products were again offered to new Merrill customer accounts. Read the full SEC Press Release here.

SEC Finds a Conflict of Interest and Failure to Disclose

The SEC's order found that Merrill Lynch failed in its duty to disclose this conflict of interest, and its deviation from standard decision-making process to its customers resulted in depriving customers of their right to unbiased financial advice. Marc P. Berger, Director of the SEC's New York Regional Office, described the effects of the firm's actions in this statement: "Retail clients must feel confident that their advisers are eliminating or disclosing such conflicts and fulfilling their fiduciary duties."

Ensuring Compliance: Identifying and Disclosing Conflicts of Interest

When dealing with potential conflicts of interest and ensuring your firm is properly upholding its fiduciary responsibilities, internal examination and introspection is key. Is your firm:

Reviewing its internal controls on how the firm identifies and mitigates risks related to conflict of interest?
Reviewing its policies and procedures on how and where potential and actual conflicts of interest are disclosed to clients and prospects?
Reviewing its processes for monitoring any potential conflicts of interest before trouble arises?

Once a conflict of interest is detected, it should be escalated to senior management for review and mitigation considerations. If the conflict cannot be eliminated, it should be promptly disclosed to clients, which is typically occurs the firm's Form ADV, advisory contract and/or other disclosure documents.

Reviewing Internal Controls and Disclosure Practices - Jacko Law Group Can Help

Jacko Law Group, PC, provides legal consulting and strategy development services to help our clients establish effective written policies, procedures, and internal controls that assist in identifying and mitigating possible conflicts of interest. Through risk assessments and mock SEC examinations, we are able to help detect conflicts that a firm may not have considered. Using a practical, systematic approach, we can help your firm develop proper disclosure policies and practices that take into account the need for your clients to receive unbiased financial guidance required for SEC compliance, in addition to providing legal support for any additional issues that arise - contact us with any questions you may have.

    
 
 
       Posted on Google  
   
   Alan Markfeld 
 
 
 
 Trustindex verifies that the original source of the review is Google. Dharmi is an excellent securities lawyer who understands the law as it pertains to these cases.  She is extremely proactive and represents her clients well.  I highly recommend Jacko and Dharmi.
  
 
      Posted on Google  
   
   Danielle Martin 
 
 
 
 Trustindex verifies that the original source of the review is Google. I’ve had the privilege of working closely with this firm in my role as Chief Compliance Officer and I can confidently say they are an exceptional compliance partner.

Their depth of experience is immediately evidentand they bring a level of practical knowledge. What I truly enjoy is their ability to translate complex regulatory requirements into plain English, often using real, everyday examples that make implementation far more manageable.

They are also incredibly responsive and reliable. In a field where timing matters, their prompt communication and thoughtful guidance have been invaluable.

If you’re looking for a compliance attorney who combines expertise, clarity, and professionalism, I highly recommend them.
  
 
      Posted on Google  
   
   Curt Rocca 
 
 
 
 Trustindex verifies that the original source of the review is Google. Michelle and the team at Jacko Law Group have helped guide through a variety of critical circumstances as we ventured through the uncharted and unfamiliar territory of becoming and successfully operating as an RIA. I have particularly appreciated Michelle's personal involvement and genuine caring about us and our organization. She has been responsive and her counsel has been consistently on-point and helpful. She artfully guided us through our initial filing process and first SEC exam process - which went very well. Very grateful to Michelle and her team.
  
 
      Posted on Google  
   
   Nicholas Di Paolo 
 
 
 
 Trustindex verifies that the original source of the review is Google. Michelle and her team were excellent to work with, front to back.  They helped me to understand the challenges ahead and were always proactive in their consultation through every step of my transition.  JLG truly know the wealth management industry very well and did a great job of understanding the challenges unique to my business.  Without them, I can confidently say I would not have felt as comfortable through the transition as I did.  Fortunately, that's not something that stops there - Michelle and her team have kept in touch to ensure that I'm on top of certain administrative issues, trends, and simply showing me that they care about my business and success.  I look forward to continuing to work with them for many years to come.
  
 
      Posted on Google  
   
   Margery Neis 
 
 
 
 Trustindex verifies that the original source of the review is Google. Dharmi Mehta was extremely helpful when my business partner and I transitioned to a new RIA firm.  She and her staff were all very professional.  Her guidance during our transition was invaluable.  I highly recommend Dharmi and Jacko Law Group.
  
 
      Posted on Google  
   
   Joseph Burwell 
 
 
 
 Trustindex verifies that the original source of the review is Google. Dharmi and Amandeep were a delight to work with. They assisted me with a claim and stuck with me the entire way through. Dharmi's advice was invaluable, and I was most impressed by her clear and professional communication. From beginning-to-end, both Dharmi and Amandeep kept me well informed. Their entire team are proud of their work and rightfully so. Thank you!
  
 
      Posted on Google  
   
   Faruk Jaffer 
 
 
 
 Trustindex verifies that the original source of the review is Google. My mentor once told me that a good attorney is worth their weight in gold — and that couldn't be more true of Michelle and Amanda. Their expertise, professionalism, and responsiveness were top notch every step of the way. It's rare to find legal partners who are not only sharp and thorough, but also genuinely invested in your success. I’m grateful for their guidance and highly recommend them to anyone seeking trusted legal counsel.
  
 
      Posted on Google  
   
   everistus etafo 
 
 
 
 Trustindex verifies that the original source of the review is Google. It is my great Privilege to share my Review of what Atty Dharmi Mehta of Jacko Law Group did for me and by extension for my family.
From the first time complimentary conversation we had having  spoken to several other Lawyers ,l knew she was the right person for the Job .Because of her background as a former RR ,she was professional,kind, Empathetic,listened and was focused on fighting for me.
From a potential of been terminated with cause ,l was able to walk away with a clean U5 with a validation that l did nothing wrong except what was in the best Interest of my clients.
I hope nobody ever has to go through what l have Experienced, but  if you do ,you want Dharmi Mehta beside you .Rest assured your service Deserve 10 stars but this forum only allows 5.
Me and my family are forever grateful and will make sure that any RR who needs an advocate will know about you .
Everistus Etafo
  
 
      Posted on Google  
   
   Karen Althaus 
 
 
 
 Trustindex verifies that the original source of the review is Google. I have worked with Jacko Law Group for 2 different business situations that necessitated an attorney.  In both cases, the team was very thorough & competent.  Their attention to our situation and the extra effort they put into our case(s) was very much appreciated.  I would highly recommend Jacko Law Group!

Alan Markfeld

Dharmi is an excellent securities lawyer who understands the law as it pertains to these cases. She is extremely proactive and represents her clients well. I highly recommend Jacko and Dharmi.

Danielle Martin

I’ve had the privilege of working closely with this firm in my role as Chief Compliance Officer and I can confidently say they are an exceptional compliance partner. Their depth of experience is immediately evidentand they bring a level of practical knowledge. What I truly enjoy is their ability to translate complex regulatory requirements into plain English, often using real, everyday examples that make implementation far more manageable. They are also incredibly responsive and reliable. In a field where timing matters, their prompt communication and thoughtful guidance have been invaluable. If you’re looking for a compliance attorney who combines expertise, clarity, and professionalism, I highly recommend them.

Curt Rocca

Michelle and the team at Jacko Law Group have helped guide through a variety of critical circumstances as we ventured through the uncharted and unfamiliar territory of becoming and successfully operating as an RIA. I have particularly appreciated Michelle's personal involvement and genuine caring about us and our organization. She has been responsive and her counsel has been consistently on-point and helpful. She artfully guided us through our initial filing process and first SEC exam process - which went very well. Very grateful to Michelle and her team.

Nicholas Di Paolo

Michelle and her team were excellent to work with, front to back. They helped me to understand the challenges ahead and were always proactive in their consultation through every step of my transition. JLG truly know the wealth management industry very well and did a great job of understanding the challenges unique to my business. Without them, I can confidently say I would not have felt as comfortable through the transition as I did. Fortunately, that's not something that stops there - Michelle and her team have kept in touch to ensure that I'm on top of certain administrative issues, trends, and simply showing me that they care about my business and success. I look forward to continuing to work with them for many years to come.

Margery Neis

Dharmi Mehta was extremely helpful when my business partner and I transitioned to a new RIA firm. She and her staff were all very professional. Her guidance during our transition was invaluable. I highly recommend Dharmi and Jacko Law Group.

Joseph Burwell

Dharmi and Amandeep were a delight to work with. They assisted me with a claim and stuck with me the entire way through. Dharmi's advice was invaluable, and I was most impressed by her clear and professional communication. From beginning-to-end, both Dharmi and Amandeep kept me well informed. Their entire team are proud of their work and rightfully so. Thank you!

Faruk Jaffer

My mentor once told me that a good attorney is worth their weight in gold — and that couldn't be more true of Michelle and Amanda. Their expertise, professionalism, and responsiveness were top notch every step of the way. It's rare to find legal partners who are not only sharp and thorough, but also genuinely invested in your success. I’m grateful for their guidance and highly recommend them to anyone seeking trusted legal counsel.

everistus etafo

It is my great Privilege to share my Review of what Atty Dharmi Mehta of Jacko Law Group did for me and by extension for my family. From the first time complimentary conversation we had having spoken to several other Lawyers ,l knew she was the right person for the Job .Because of her background as a former RR ,she was professional,kind, Empathetic,listened and was focused on fighting for me. From a potential of been terminated with cause ,l was able to walk away with a clean U5 with a validation that l did nothing wrong except what was in the best Interest of my clients. I hope nobody ever has to go through what l have Experienced, but if you do ,you want Dharmi Mehta beside you .Rest assured your service Deserve 10 stars but this forum only allows 5. Me and my family are forever grateful and will make sure that any RR who needs an advocate will know about you . Everistus Etafo

Karen Althaus

I have worked with Jacko Law Group for 2 different business situations that necessitated an attorney. In both cases, the team was very thorough & competent. Their attention to our situation and the extra effort they put into our case(s) was very much appreciated. I would highly recommend Jacko Law Group!

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General Corporate Counsel+

Undisclosed Conflict of Interest: Merrill Lynch Settles SEC Charges

Conflict of Interest and Breaking from Standard Procedure

SEC Finds a Conflict of Interest and Failure to Disclose

Ensuring Compliance: Identifying and Disclosing Conflicts of Interest

Reviewing Internal Controls and Disclosure Practices - Jacko Law Group Can Help

About the author

Michelle L. Jacko, Esq.

Managing Partner and CEO

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Mergers & Acquisitions+

Regulatory Compliance Counsel+

Corporate & Securities Litigation+

Private Funds & Transactions+

General Corporate Counsel+

Mergers & Acquisitions+

Regulatory Compliance Counsel+

Corporate & Securities Litigation+

Private Funds & Transactions+

General Corporate Counsel+

Undisclosed Conflict of Interest: Merrill Lynch Settles SEC Charges

Conflict of Interest and Breaking from Standard Procedure

SEC Finds a Conflict of Interest and Failure to Disclose

Ensuring Compliance: Identifying and Disclosing Conflicts of Interest

Reviewing Internal Controls and Disclosure Practices - Jacko Law Group Can Help

About the author

Michelle L. Jacko, Esq.

Managing Partner and CEO

Related Insights

Another Private Equity SEC “Pay-to-Play” Enforcement

SEC Enforcement Action Against Leonard S. Schwartz: Testimonials, Social Media, and the Advisers Act of 1940

SEC Charges Charles Schwab With Failing to File Suspicious Activity Reports for Questionable Transactions

Regulatory Compliance  Counsel+

Regulatory Compliance  Counsel+