According to the Securities and Futures Commission the bank “failed to take adequate steps to properly handle the complaints of 11 clients in 2008 before rejecting their complaints” – a breach, it said, of the SFC’s Code of Conduct.
The fraud was perpetrated by Joyce Hsu Ming Mei, a former licensed representative of Merrill Lynch, which is part of New York-headquartered Bank of America. According to the SFC, the clients complained to Merrill Lynch that Hsu:
- misrepresented certain investment products to them as principal guaranteed when they were not;
- conducted unauthorized transactions in their accounts;
- conducted unauthorized loan drawdowns in their accounts;
- conducted unauthorized fund transfers in their accounts; and
- provided false account statements.
Hsu was subsequently convicted of 20 counts of theft and other dishonesty offences.
While Merrill Lynch made inquiries into each complaint, they failed to fully investigate all the relevant circumstances leading to some complaints being incorrectly rejected, said the SFC.
The principal amount invested by the 11 clients in the disputed investment products is about US$7,228,000 (HK$56,380,000). Hsu also handled an additional 37 client accounts.
Merrill Lynch has agreed with the SFC that an independent law firm and auditor will conduct a review of all client accounts handled by Hsu and to assess the amount of loss (if any) in each account arising as a result of Hsu’s misconduct. Merrill Lynch has also agreed to fully compensate any client whose account was handled by Hsu and who has suffered loss as a result of any misconduct by Hsu less any compensation that may have been paid already.
