Merrill Lynch agreed on Wednesday to pay a $225,000 fine and accept a censure after FINRA said it failed to report more than 1,600 customer complaints buried in post-call survey comments. The settlement closes a long-running reporting failure that stretched from 2018 to 2023 and touched a system meant to catch broker-dealer complaints before they slipped through.
The enforcement case lands now because the penalty is fresh and the numbers are stark: in 2023 alone, Merrill received more than 220,000 survey responses, identified and reported around 2,400 complaints, and still missed 1,600 more because its supervisory system was not programmed to pick them up. Those missed complaints were not all alike. Most were routine service issues, but some involved customers who could not access funds or obtain account information and documents, while others involved technical problems with Merrill's online systems and security incidents.
FINRA said the firm’s review process leaned on a lexicon of search terms and criteria that had been built for consumer banking products, not for the complaint patterns that showed up in broker-dealer business. That mattered because the free-form comment boxes in post-call surveys were where customers described problems in their own words, and Merrill’s controls were not reasonably designed to identify every reportable complaint hidden there. The firm agreed to the settlement without admitting or denying the findings.
There is a wrinkle in the case. FINRA still credited Merrill for self-reporting the issue, reviewing 2023 survey responses, resolving complaints it found and then reporting those complaints to the regulator. Merrill also suspended the written comment section of its post-call surveys in January 2024 after identifying the problem. Sean George has since left after 17 months in the role, leaving Merrill Lynch to defend a complaint system that FINRA said failed at the basic task of catching what customers were already trying to tell it.
The broader lesson is simple: a complaint system that depends on the wrong vocabulary will miss real complaints, even when the firm thinks it is watching closely. Merrill's brokerage unit includes its Merrill Lynch Wealth Management franchise and Bank of America Private Bank, and FINRA's finding shows how a reporting gap in one part of the business can run for years before anyone forces the count into the open. What remains unanswered is how many missed complaints fell into each category, because the regulator's figure makes clear the scale of the failure without breaking down the full mix.
