tl;dr
Merrill Lynch was ordered to pay $3.68 million in damages and costs following an arbitration ruling brought by clients Qun He and Haihui Zhang. The clients accused Merrill Lynch of breaching securities laws, industry standards, fiduciary duties, negligence, and contract breaches related to certain s...
Merrill Lynch has been ordered to pay $3,684,163 million in damages and associated costs following an arbitration ruling against the wealth management firm. The dispute originated from a complaint filed by two clients, Qun He and Haihui Zhang, in late 2023, accusing Merrill Lynch of breaching securities laws, industry standards, and its fiduciary duties.
The complainants also charged Merrill with negligence, negligent supervision, and contract breaches related to certain unspecified securities. Merrill Lynch denied all allegations, but the U.S. Financial Industry Regulatory Authority (FINRA) provided an independent arbitration forum to address the case.
A public arbitration panel ruled in favor of the clients, awarding $2.73 million in compensatory damages, $2,002 in costs, and $954,634 in attorneys’ fees. According to Michael Bixby, the attorney representing the clients, a Merrill broker had recommended investments in illiquid proprietary feeder funds linked to private equity investments managed by institutional giants such as Apollo Global Management, KKR, and Blackstone.
Bixby explained that while these feeder funds were promoted with potential annual returns between 15% and 20%, actual returns amounted to only around 3% after fees and administration costs deducted by Merrill. He expressed satisfaction with the arbitration outcome, viewing it as an acknowledgment of Merrill's misconduct and accountability for its actions.