The Securities and Exchange Commission issued a press release yesterday. The dateline very clearly reads, “June 12, 2018.” The release number indicates that it is the 105th press release the SEC has issued this year, which checks out, since the previous release, last week’s “SEC Names Sarah ten Siethoff Associate Director in the Division of Investment Management’s Rulemaking Office,” was the 104th.
But then you start reading and feel a distinct sense of vertigo.
The Securities and Exchange Commission today announced that Merrill Lynch, Pierce, Fenner & Smith Inc. will pay more than $15 million to settle charges that its employees misled customers into overpaying for Residential Mortgage Backed Securities (RMBS).
As I just patiently explained to Thad, Merrill Lynch, Pierce, Fenner & Smith was a major investment bank, one of the biggest on Wall Street, and RMBS were a type of derivative that almost destroyed the global economy—and that did destroy Merrill Lynch—10 years ago. And yet here is a press release, purporting to be just 24 hours old, that says Merrill Lynch, which, again, was absorbed into Bank of America 10 years ago, is paying $10.5 million in restitution and $5.2 million in penalties for overcharging customers for RMBS.
The press release goes on to say that “Merrill Lynch traders and salespersons convinced the bank’s customers to overpay for RMBS by deceiving them about the price Merrill Lynch paid to acquire the securities,” which does indeed sound very 2008. “The order also found that Merrill Lynch’s RMBS traders and salespersons illegally profited from excessive, undisclosed commissions – called ‘mark-ups’ – which in some cases were more than twice the amount the customers should have paid.” Again, very much the kind of thing banks like Merrill Lynch might do back when I was Thad’s age. “Merrill Lynch failed to have compliance and surveillance procedures in place that were reasonably designed to prevent and detect the misconduct” is another sentence that could have been written pre-Great Recession, as no one had heard of something called “compliance” prior to Dodd-Frank.
The press release includes no information about the timing of the above-listed alleged misdeeds (then as now, no one admits or denies wrongdoing in these things, so no clue there), leaving open the possibility that the SEC’s not-exactly-airtight systems mistakenly issued a decade-old press release, changing the second zero in “2008” to a “1.” Further investigation is required, and since I stopped being a real reporter a long time ago, simply picking up the phone and calling the SEC is out of the question. Back to the close reading.
The press release quotes a “Daniel Michael,” who is identified as “Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit.” Sure enough, another SEC press release tells me that he was named to this job in December—of 2017, not 2007. Indeed, in 2007, LinkedIn tells me, this Daniel Michael was graduating from Harvard Law School and then doing scut work at Cravath, and definitely not punishing RMBS shenanigans. The plot thickens.
OK, other names: The investigation was conducted by Melissa Lessenberry, Thomas Silverstein and Kelly Rock. Lessenberry’s been on the government payroll since at least 2004, so that does nothing to resolve the mystery. Silverstein and Rock, too. They were assisted by Sharon Bryant, John Worland and Sarah Concannon. Worland was at the SEC during the crisis times, but Bryant has only been at there since 2010 and Concannon since just 2016. Interesting.
Improbable as it seems, the evidence points to something called Merrill Lynch, Pierce, Fenner & Smith Inc. paying fines for allegedly screwing customers over on RMBS in the year 2018. You know, Thad, the more things change, the more they stay the same. Thad?