NH Securities Bureau Reaches Record $26M Settlement

The New Hampshire Bureau of Securities Regulation settled its case against New York-based broker-dealer Merrill Lynch and its agent Charles Kenahan on Dec. 7; instituting its largest monetary sanction in Bureau history.

Merrill Lynch was assessed a fine of $1,750,000 plus costs of $250,000. In addition, Kenahan was permanently barred from the securities business in NH and Merrill Lynch was ordered to pay restitution of $24,250,000 and was ordered to maintain compliance undertakings specifically put in place to address the compliance failures uncovered by the Bureau's investigation.

The Bureau's action cites Merrill Lynch for failing to supervise Kenahan and that Kenahan traded without authorization, mismarked trade confirmations, excessively traded stocks and initial public offerings, overcharged commissions, and inappropriately traded inverse and leveraged products. The misconduct led to high commissions for Merrill Lynch and Kenahan and heavy losses for the investor. Kenahan was terminated in July 2019 and the investor moved his accounts away from Merrill Lynch.

The harmed investor from Rye complained to the Bureau in January 2019. The investor and his family are of high net worth and entrusted Merrill Lynch and Kenahan with several brokerage accounts of substantial value. The investor had been a client of Merrill Lynch and Kenahan since Kenahan moved over to Merrill Lynch from his previous broker-dealer in 2007.

Although the investor was knowledgeable about securities markets, he entrusted Merrill Lynch and Kenahan to recommend investment strategies and securities used in the family accounts. One such recommendation was for the purchase of a company called Monitise, a low-priced stock not even followed by Merrill Lynch research. Kenahan repeated this conduct across multiple customer accounts. The investor subsequently lost millions of dollars in Monitise and in other low-priced stocks.

"This case is about an abuse of trust committed by Merrill Lynch and Kenahan," said Jeff Spill, deputy director and head of enforcement for the Bureau.

The investor trusted Merrill Lynch and Kenahan to give him good advice and act in good faith. Ultimately, Kenahan's recommendations benefited Kenahan and Merrill Lynch and not the investor.

Brian Linares, a staff attorney who also worked on the case, says, "Investors should be able to trust and have full faith in their financial advisors, and Merrill Lynch and Kenahan broke that trust. Merrill Lynch and Kenahan are being held accountable for their actions.”