Merrill (company)

Merrill Lynch, Pierce, Fenner & Smith Incorporated
Company type	Division
Industry	Investment management, Wealth management, Financial services
Predecessor	Merrill Lynch & Co., Inc.
Founded	January 6, 1914; 112 years ago in New York City, United States
Founder	Charles E. Merrill
Fate	Acquired by Bank of America (2009); merged into Bank of America Corporation (2018)
Successor	Bank of America Global Wealth and Investment Management
Headquarters	New York City, United States
Area served	United States
Products	Investment and wealth management services, Merrill Edge platform, brokerage services
Owner	Bank of America
Number of employees	14,000+
Parent	Bank of America
Website	www.merrill.com

Merrill Lynch, Pierce, Fenner & Smith Incorporated, commonly referred to as Merrill and previously known simply as Merrill Lynch, functions as the investment and wealth management division of Bank of America in the United States. Together with BofA Securities, which serves as the investment banking sector, both divisions conduct prime brokerage and broker-dealer operations. Merrill’s headquarters are located in New York City, where it formerly occupied the entire 34-story building at 250 Vesey Street within the Brookfield Place complex. The firm employs more than 14,000 financial advisors and oversees $2.8 trillion in client assets, contributing to a total of $3.4 trillion under Global Wealth and Investment Management. Additionally, Merrill runs Merrill Edge, a platform providing investment services alongside call center advisory support.

Prior to 2009, Merrill Lynch was listed on the New York Stock Exchange as a publicly traded company. During the 2008 financial crisis, specifically on September 14, 2008, it consented to acquisition by Bank of America amid the collapse of Lehman Brothers. This transaction was completed in January 2009, with Merrill Lynch & Co., Inc. ultimately merging into Bank of America Corporation by October 2018. Certain subsidiaries continued using the Merrill Lynch brand, including the brokerage arm Merrill Lynch, Pierce, Fenner & Smith. In 2019, Bank of America rebranded this division simply as "Merrill."

Merrill Lynch became well-known for its large cadre of financial advisors—often called the "thundering herd"—which facilitated direct placement of securities underwritten by the firm. This approach differed from competitors such as Morgan Stanley, which depended on independent brokers for securities distribution. Historically dubbed Wall Street’s "Catholic" firm, Merrill Lynch’s leadership was predominantly composed of Irish Catholics.

Founding and early history

The origins of the company trace back to January 6, 1914, when Charles E. Merrill established Charles E. Merrill & Co. at 7 Wall Street in New York City. Shortly thereafter, his associate Edmund C. Lynch joined him, leading to an official renaming in 1915 as Merrill, Lynch & Co. Notably, a comma separated Merrill and Lynch until it was removed in 1938. The firm welcomed Winthrop H. Smith in 1916.

In 1921, the company acquired Pathé Exchange, which subsequently evolved into RKO Pictures. By 1926, it had gained controlling interest in Safeway Inc., expanding the modest grocery store into the nation’s third-largest grocery chain by the early 1930s.

A significant restructuring occurred in 1930 when Charles Merrill spun off the retail brokerage segment to E. A. Pierce & Co. to concentrate on investment banking activities. Most personnel—including Lynch and Smith—transferred to E.A. Pierce, with Merrill retaining a minority stake in that firm. Throughout the 1930s, E.A. Pierce remained America’s largest brokerage under leaders Edward A. Pierce, Edmund Lynch, and Winthrop Smith; it pioneered innovations such as utilizing IBM machines for record-keeping and operated the country’s most extensive private wire order network.

Despite its dominant market position, E.A. Pierce faced financial challenges during the 1930s and was undercapitalized. Following Edmund C. Lynch’s passing in 1938, Winthrop Smith initiated discussions with Charles Merrill—who held a minority interest in E.A. Pierce—to merge their companies. On April 1, 1940, Merrill Lynch combined with E.A. Pierce & Co. and Philadelphia-based Cassatt & Co., briefly adopting the name Merrill Lynch, E.A. Pierce, and Cassatt. In 1941, this firm became Wall Street’s first to issue an annual fiscal report.

Later in 1941, Merrill Lynch, E.A. Pierce & Cassatt merged with Fenner & Beane—a New Orleans–based investment bank and commodities firm that ranked as the second-largest U.S. securities company at that time—forming a dominant national brokerage entity renamed Merrill Lynch, Pierce, Fenner & Beane.

Post-war period

In 1952, the firm established Merrill Lynch & Co. as a holding company and officially transitioned from nearly five decades as a partnership to incorporation. By December 31, 1957, The New York Times referred to the firm's name as "a sonorous bit of Americana," highlighting the decision to rename Merrill Lynch, Pierce, Fenner, and Beane in honor of Winthrop H. Smith, who had been leading the company since 1940. This merger positioned the firm as the largest securities company globally, with offices spread across more than 98 cities and memberships on 28 stock exchanges. On March 1, 1958, it adopted the name "Merrill Lynch, Pierce, Fenner & Smith" and secured membership on the New York Stock Exchange.

In 1964, following the passing of Christopher J. Devine in 1963, Merrill Lynch acquired C. J. Devine & Co., a prominent dealer in U.S. government securities. This acquisition led to the creation of Merrill Lynch Government Securities Inc., significantly enhancing the firm's role in government bonds and facilitating the launch of innovative money market and government bond mutual funds that propelled expansion throughout the 1970s and 1980s.

Merrill Lynch went public in June 1971 through an initial public offering, one year after NYSE permitted member firms to become publicly traded entities. At that stage, it operated as a multinational enterprise managing client assets exceeding US$1.8 trillion across more than 40 countries.

The introduction of the Cash Management Account (CMA) in 1977 offered clients an innovative solution by enabling cash transfers into a money market fund with integrated check-writing and credit card capabilities—strengthening Merrill Lynch's competitive position against traditional banks.

In 1978, the firm broadened its securities underwriting operations by acquiring White Weld & Co., a well-established investment bank, thereby boosting its investment banking expertise.

During the late 1990s, Maxim Shashenkov, previously Vice President for Russia at Merrill Lynch’s London office, took leadership of Alfa Securities Ltd under Alfa Group’s Alfa-Bank.

Canadian activities in the 1990s

The company divested its Canadian private client division to CIBC Wood Gundy in 1990. Merrill Lynch reentered the Canadian investment arena in June 1998 by purchasing Midland Walwyn Inc, recognizing Canada as the seventh-largest personal investment market globally. However, in December 2001, Merrill Lynch sold Midland Walwyn back to CIBC Wood Gundy.

Stake in TMS Entertainment (2003)

In 2003, Merrill Lynch acquired a 7.54% equity stake in Japanese animation studio TMS Entertainment by purchasing approximately 3.33 million shares, becoming its second-largest shareholder. This was a purely financial investment without any intention to influence management decisions.

Subprime mortgage crisis

In November 2007, Merrill Lynch disclosed $8.4 billion in write-downs related to losses from the subprime mortgage crisis and terminated CEO E. Stanley O'Neal. O'Neal had attempted an unauthorized merger with Wachovia, which failed to gain board approval. John Thain was appointed CEO and rapidly overhauled senior leadership by bringing in former New York Stock Exchange executives such as CFO Nelson Chai and communications director Margaret D. Tutwiler. That same month, Merrill Lynch divested its commercial finance division to General Electric and raised over $6 billion through share sales to Singapore's Temasek Holdings.

By July 2008, Merrill Lynch announced fourth-quarter losses of $4.9 billion due to mortgage defaults and poor investments, culminating in total annual losses of $19.2 billion. The firm also declared plans to sell hedge funds and securities aimed at reducing exposure to mortgage-related assets while Temasek increased its stake by $3.4 billion.

In August 2008, New York Attorney General Andrew Cuomo threatened legal proceedings over allegations that Merrill Lynch misrepresented risks associated with mortgage-backed securities. The company proposed repurchasing $12 billion worth of auction-rate debt and revealed nearly $30 billion in losses from its UK subsidiary that were exempt from local taxation. CEO Thain committed to buying back auction-rate securities from smaller investors starting October 2008.

On September 5, 2008, Goldman Sachs downgraded Merrill Lynch’s stock rating to "conviction sell," warning of additional potential losses. Bloomberg reported that during the crisis, Merrill Lynch incurred approximately $51.8 billion in losses on mortgage-backed securities.

CDO losses

In the early 2000s, Merrill Lynch emerged as a leading force in the mortgage-backed collateralized debt obligation (CDO) sector. This prominence began in 2003 when Christopher Ricciardi transferred his CDO team from Credit Suisse First Boston to Merrill Lynch.

To generate mortgage assets for its CDOs, Merrill Lynch purchased First Franklin Financial Corp., a major subprime lender, in December 2006. Between 2006 and 2007, Merrill served as the primary underwriter for 136 CDOs totaling $93 billion. However, by late 2007, as the value of these CDOs plummeted, Merrill held significant portions on its books, leading to multibillion-dollar losses. In mid-2008, Merrill sold CDO portfolios originally valued at $30.6 billion to Lone Star Funds for $1.7 billion in cash alongside a $5.1 billion loan.

In April 2009, bond insurer MBIA filed a lawsuit against Merrill Lynch alleging fraud and other violations connected to credit default swaps on four mortgage-related CDOs. MBIA claimed that Merrill misrepresented the quality of these complex instruments to obtain AAA credit ratings. By 2010, most allegations were dismissed except for a breach of contract concerning the ratings; Merrill disputed MBIA’s assertions.

Additionally, in 2009, Rabobank initiated legal action against Merrill over the Norma CDO, accusing the firm of failing to disclose conflicts involving hedge fund Magnetar Capital, which was involved in asset selection while simultaneously betting against those assets. Rabobank contended that Merrill misled it about how assets were chosen, resulting in substantial losses when the CDO failed. Merrill rejected these accusations and clarified that this lawsuit was distinct from other cases like the SEC’s action against Goldman Sachs.

Sale to Bank of America

Merrill Lynch’s substantial losses from an extensive, unhedged mortgage portfolio tied to collateralized debt obligations undermined confidence among trading partners regarding its financial stability and ability to refinance. This erosion of trust ultimately led to its acquisition. During the week of September 8, 2008, amid critical liquidity challenges faced by Lehman Brothers that threatened wider market stability, Bank of America began negotiations to purchase Merrill Lynch for $38.25 billion in stock. The agreement was completed on September 14, 2008, with Bank of America acquiring Merrill Lynch at approximately US$50 billion or $29 per share—reflecting a 70.1% premium over the closing price on September 12 and a 38% premium above Merrill's book value, though this price was still 61% below its peak in September 2007.

Testimony before Congress and internal communications later revealed that federal officials exerted pressure on Bank of America’s CEO Kenneth Lewis to proceed with the merger, even threatening replacement of management as a condition for receiving government assistance. In addition to this acquisition support, Merrill Lynch secured billions through insurance deals with AIG, including $6.8 billion financed by the U.S. government bailout of AIG.

Post-merger with Bank of America

Following the integration of Merrill Lynch into its operations, Bank of America preserved Merrill Lynch’s wealth management division while merging its investment banking activities into the newly established entity known as BofA Securities.

Launch of Merrill Edge

On June 21, 2010, the firm introduced Merrill Edge, an electronic trading platform designed to broaden its footprint within the online brokerage market.

Rebranding

In February 2019, Bank of America revealed plans to rename the division from "Merrill Lynch" to simply "Merrill," aiming to create a more unified and streamlined brand presence.

Orange County settlement

Merrill Lynch agreed in 1998 to pay $400 million to Orange County, California to resolve claims related to the sale of unsuitable and high-risk investments to the county treasurer, Robert Citron. Citron's investment losses amounted to $1.69 billion, which contributed to the county filing for bankruptcy in 1994. Without admitting wrongdoing, Merrill Lynch settled by contributing $400 million out of the $600 million recovered by the county.

Analyst Research settlement

In 2002, Merrill Lynch consented to a $100 million payment for issuing deceptive research reports. The resolution mandated enhanced transparency in research disclosures and reinforced separation between research departments and investment banking operations.

Investor deception by Henry Blodget

During the dot-com bubble from 1999 to 2001, Merrill Lynch analyst Henry Blodget privately expressed stock opinions that contradicted his public statements. The U.S. Securities and Exchange Commission charged him with civil securities fraud in 2003. He settled without admitting or denying the charges, was permanently barred from participating in the securities industry, and paid $4 million in penalties and disgorgement.

Enron/Merrill Lynch Nigerian barge

Merrill Lynch executives faced criminal convictions in 2004 related to the Enron scandal, marking the only such charges against bank officials. The case centered on a 1999 transaction where Merrill Lynch acquired an interest in Nigerian power barges from Enron. Authorities alleged this fraudulent sale enabled Enron to record approximately $12 million in unlawful pretax profits. Four former Merrill executives and two Enron employees were charged with conspiracy and fraud. While convicted, three executives had their convictions overturned by the 5th U.S. Circuit Court of Appeals due to flawed charges. The Department of Justice chose not to pursue retrial. Separately, Merrill Lynch resolved SEC civil fraud allegations without admitting fault, dismissed implicated bankers, and agreed to external monitoring of its structured finance deals.

Discrimination charges

On June 26, 2007, Merrill Lynch was sued by the U.S. Equal Employment Opportunity Commission (EEOC) for allegedly discriminating against Dr. Majid Borumand based on his Iranian heritage and Islamic faith, citing a "reckless disregard" for his civil rights with intentional and malicious conduct alleged by the EEOC. In a related matter, a National Association of Securities Dealers arbitration panel ordered Merrill Lynch on July 20, 2007, to pay $1.6 million to Fariborz Zojaji, a former employee of Iranian descent who was dismissed due to his ethnicity. The company faced condemnation from organizations such as the National Iranian American Council and the American-Arab Anti-Discrimination Committee.

On August 13, 2008, a New Jersey appellate court ruled against Merrill Lynch in a lawsuit brought by Darren Kwiatkowski, a gay employee who endured homophobic harassment from a coworker.

In August 2013, Merrill Lynch consented to pay $160 million to settle a class-action racial discrimination lawsuit initiated in 2005 by a long-term U.S.-based employee. At that time, black brokers represented only 2% of the firm's brokerage force despite a three-decade-old EEOC consent decree requiring an increase to 6.5%. In 25 states, no black brokers were employed by the firm. The settlement fund was made available for approximately 700–1,200 black brokers and trainees dating back to May 2001. During litigation, Merrill's then-black CEO, Stanley O'Neal, acknowledged the difficulties black brokers encountered in attracting business within a predominantly white client demographic.

Settlement over market timing

In March 2005, Merrill Lynch resolved allegations of improper conduct at its Fort Lee, New Jersey branch by agreeing to a $10 million civil penalty. The case involved three primary financial advisors and a fourth with lesser involvement, who executed 12,457 trades on behalf of client Millennium Partners. These trades spanned at least 521 mutual funds and 63 sub-accounts linked to 40 variable annuities. Millennium realized profits in more than half of these funds, totaling approximately $60 million. Merrill Lynch was found to have inadequately supervised these advisors, whose market timing strategies generated short-term gains at the expense of long-term mutual fund investors.

Bonus distributions in 2008

Despite reporting a $27 billion loss in 2008, Merrill Lynch disbursed $3.6 billion in bonuses that year—equivalent to one-third of the funds it received from the Troubled Asset Relief Program. These bonus payments sparked scrutiny over potential "special timing" practices amid the firm's substantial financial setbacks.

Mismarking incident

In 2010, a trader at Merrill Lynch’s London office deliberately mismarked positions by $100 million to hide losses. As a consequence, the UK’s Financial Services Authority (FSA) imposed a ban preventing the individual from working in the securities sector for a minimum of five years. This episode exposed significant deficiencies in the firm’s internal control systems and risk oversight.

Deceptive disclosures about trading venues

On 19 June 2018, the SEC charged Merrill Lynch with misleading brokerage clients regarding the venues where their trades were executed between 2008 and 2013. Merrill Lynch acknowledged its misconduct and consented to a $42 million fine.

Improper practices with ADRs

On 22 March 2019, Merrill Lynch settled charges brought by the SEC concerning improper management of pre-released American depositary receipts by agreeing to pay over $8 million. Without admitting or denying the allegations, the firm consented to disgorgement exceeding $4.4 million, prejudgment interest of $724,000, and a penalty amounting to $2.89 million.

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