Updates to our Terms of Use

We are updating our Terms of Use. Please carefully review the updated Terms before proceeding to our website.

Friday, May 17, 2024 | Back issues
Courthouse News Service Courthouse News Service

Merrill Lynch Sued by SEC Over ‘Squawk Boxes’

WASHINGTON (CN) - Merrill Lynch helped day traders at other firms trade ahead by broadcasting customer orders through "squawk boxes," or supposedly internal intercom systems, according to charges filed by the Securities and Exchange Commission.

Between 2002 and 2004, "several" Merrill Lynch brokers at three branch offices "put their telephones next to the squawk boxes and let the day traders listen to the squawk box, often for the entire day," the SEC's New York office said. The boxes are supposed to be a communication line where Merrill Lynch brokers communicate customer buy and sell requests to the company's own traders. Instead, traders at other firms used the information to trade ahead.

SEC officials explained in a press release that Merrill Lynch did not limit or track employee access to the squawk boxes, and had no way of accessing possible abuse of the system.

Merrill Lynch agreed to a $7 million penalty, without admitting or denying the charges. The company also promised to tighten security on customer information.

Categories / Uncategorized

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Loading...