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March 23, 2018

Posted  March 23, 2018

New York announced that Bank of America Merrill Lynch (“BofAML”) will pay a record $42 million penalty to the State of New York to settle an investigation into fraudulent practices in connection with BofAML’s electronic trading services. As part of the settlement, BofAML admits that, pursuant to undisclosed agreements with so-called electronic liquidity providers (“ELPs”) such as Citadel Securities, Knight Capital, D.E. Shaw, Two Sigma Securities, and Madoff Securities, BofAML systematically concealed from its clients over a five-year period that it was secretly routing its clients’ orders for equity securities to such firms for execution. Attorney General Schneiderman’s investigation uncovered that BofAML made other misleading statements to its clients regarding several aspects of its electronic trading services—statements that made BofAML’s electronic trading services appear safer and more sophisticated than they really were. In addition to paying a penalty to New York State, BofAML admitted that it violated the Martin Act, New York’s securities law, and New York Executive Law § 63(12). NY