Landon L. Williams, of Jacksonville, Florida, a stockbroker with Merrill Lynch, Pierce, Fenner & Smith Incorporated, was charged by Financial Industry Regulatory Authority (FINRA) in a Complaint alleging that Williams had made misrepresentations to firm customers concerning securities transactions. Department of Enforcement v. Williams, No. 2014042524301 (Aug 4, 2016).
According to the Complaint, from March 5, 2014 through July 23, 2014, Williams, while associated with Merrill Lynch in the capacity of financial solutions advisor, made misrepresentations to five of the firm’s customers concerning securities transactions. These misrepresentations were apparently noted through telephone conversations with customers, and also through the notes that Williams made in the firm’s customer relationships management application software.
The Complaint first identified Williams misrepresentations regarding customer ASA, a California client, that were made in the course of Williams’ phone conversations with ASA concerning her retirement account portfolio. According to the Complaint, Williams stated to ASA that her two existing Blackrock mutual funds carried annual expenses of 1.81 percent, whereas the comparable mutual fund class A shares had expenses of 0.87 percent. Williams apparently stated to ASA that the class A shares would carry lower annual operating expenses and allow her to gain a higher annual rate of return than her existing C shares in the Blackrock funds.
FINRA claimed that the aforementioned statements made by Williams to ASA were misleading and false when considering that the shares that Williams spoke of for comparison involved a switch from ASA’s class C shares in the BCBCX Fund to an entirely different investment in Blackrock Funds Diversified Portfolios IV, a growth fund. FINRA also alleged that the Blackrock Global Allocation Fund IV Fund Class A shares carried 1.10 expenses, rather than the 0.87 percent that Williams stated.
Williams also allegedly misstated to ASA that in three years, she would be able to recoup the upfront cost of a class A share purchase in connection with the switching of her funds. The Complaint stated that Williams had knowledge or should have known that his representation to ASA was false due to Williams’ notes pertaining to this issue referring to ASA’s breakeven point as seven years, rather than three. FINRA also noted that Williams misrepresented ASA’s investment horizon as being ten years or more, when ASA actually stated to Williams that she intended to withdrawal her accounts funds in as early as one year.
The Complaint also noted representations that Williams made to customer RLC, a Michigan client who invested with Merrill Lynch since 2008. Apparently, on June 11, 2014, Williams made recommendations to RLC concerning the sale of PIMCO Money Market Fund Class C Funds and investment of proceeds in Franklin Strategic Income Fund Class C and Franklin Income Fund Class C.
According to the Complaint, Williams told RLC that the Franklin Strategic Income Fund consisted of short term investment grade bonds and was very conservative. FINRA claimed that such representation was false, as the fund was not investment grade, nor was it very conservative. FINRA further alleged that the Fund’s prospectus never made any indication that it would only invest in investment grade securities, noting that the Fund allowed for investment of one-hundred percent of the Fund to be in sub-investment grade debt.
FINRA also alleged in the Complaint that Williams told RLC that the fund was comprised sixty percent of high quality stocks, with the remainder in investment grade debt. FINRA claimed that the aforementioned representation was false, again noting that the prospectus did not carry an obligation for the securities of the Fund to be comprised of investment grade bonds, and that the Fund could invest the entirety of monies in debt securities.
Williams reportedly claimed in Merrill Lynch’s customer relationship management system that RLC had far in excess of six months of his household expenses saved, when RLC apparently never stated any amount he accumulated to cover his expenses. Williams also seemingly claimed that RLC was made aware that the investment in the aforementioned Franklin Funds could contain debt rated at below investment grade, when Williams apparently did not disclose such information to RLC.
FINRA alleged that misrepresentations were made by Williams to three additional Merrill Lynch customers concerning investments. FINRA alleged that Williams’ misrepresentations were fraudulent and willful, and constituted violations of Exchange Act of 1934 Section 10(b), SEC Rule 10b-5, as well as FINRA Rules 2010 and 2010. FINRA further alleged that Williams caused Merrill Lynch’s records and books to be inaccurate due to his misrepresentations in his firm’s customer relationship management system; conduct violative of FINRA Rules 4511 and 2010.
Public disclosure records reveal that Merrill Lynch terminated Williams on August 6, 2014, in connection with allegations of Williams’ failure to make required disclosures pertaining to mutual funds transactions, and for his inaccurate internal system entries concerning his client contacts.
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