Customers wrote about frozen funds, missing account information, security incidents and ordinary service failures. FINRA found that Merrill Lynch’s survey-review system frequently failed to recognize those messages as reportable complaints.
TL;DR
- FINRA found that Merrill Lynch failed to report thousands of written customer complaints found in post-call surveys from January 2018 through December 2023.
- In 2023 alone, the firm received more than 220,000 written survey responses, timely reported 2,423 complaints and failed to report more than 1,600 additional complaints.
- The review system used search terms originally developed for consumer banking products rather than the terminology Merrill Lynch generally used to detect broker-dealer complaints.
- More than 85% of the unreported 2023 complaints lacked the system’s “potential complaint” flag.
- Merrill Lynch detected the problem, reviewed 2023 responses, resolved and reported the complaints it identified, suspended written survey comments and self-disclosed the failure.
- The firm accepted a censure and a $225,000 fine without admitting or denying FINRA’s findings.
The customers were speaking. The compliance system was listening for the wrong words.
Transparency Notice
This investigation is based on FINRA’s Letter of Acceptance, Waiver, and Consent No. 2024081776401, accepted on June 10, 2026. Merrill Lynch accepted and consented to FINRA’s findings without admitting or denying them and agreed to the sanctions. The document is an accepted regulatory settlement, not a judicial opinion issued after a trial.
The Facts
During 2023, Merrill Lynch received more than 220,000 written responses in the commentary section of surveys offered after customer-support calls. The firm timely reported 2,423 of those responses as complaints. FINRA found that more than 1,600 additional written complaints in the same surveys went unreported.
The 2023 sample was one year inside a longer failure. According to the accepted settlement, Merrill Lynch did not accurately report thousands of customer complaints from January 2018 through December 2023.
Most of the unreported complaints involved service issues. Others concerned an inability to access funds, difficulty obtaining account information or documents, technical problems with Merrill Lynch’s online system and security incidents.
The scale of the firm makes the reporting system more than an administrative footnote. The AWC describes Merrill Lynch as a global investment banking and brokerage firm with more than 27,500 registered representatives and over 4,000 branches.
Why Written Complaints Matter
FINRA Rule 4530 requires member firms to report certain customer complaints. Under Rule 4530(d), firms must submit quarterly statistical and summary information about written complaints by the fifteenth day of the month following the relevant calendar quarter. Supplementary Material .08 covers any written customer grievance involving the firm or someone associated with it.
In plain English, a complaint does not stop being a complaint because it arrived through a survey box rather than a letter labeled “formal complaint.” If a customer writes a grievance involving the brokerage, the firm needs a reasonable process for recognizing and reporting it.
FINRA says it uses complaint data to identify and begin investigations into firms, associated people and others who may present risks to investors. When complaints are not reported on time, the regulator loses a source of timely pattern detection.
A feedback channel can become a compliance channel the moment a customer uses it to describe a grievance.
The Filter Was Built for a Different Job
Merrill Lynch did have a review system. The failure was in how that system was designed and used.
The firm required supervisory review when a survey response matched a lexicon of search terms or met other flagging criteria. But FINRA found that the lexicon applied to the surveys had originally been developed for consumer banking products. It was not the lexicon Merrill Lynch generally used to review electronic communications for potential broker-dealer complaints.
The distinction mattered because the review platform attached a “potential complaint” flag only when a response matched those search terms. Merrill Lynch’s guidance documents also supplied clearer complaint-identification instructions when that flag appeared.
Responses that did not use the expected language were therefore less likely to receive the label that made them easier for supervisors to recognize. FINRA found that this caused the firm to frequently miss reportable complaints.
The clearest number in the record
“More than 85% of the unreported customer complaints arising out of survey responses in 2023 did not have a ‘potential complaint’ flag.”
FINRA Letter of Acceptance, Waiver, and Consent, footnote 2
The problem was not that Merrill Lynch collected no feedback. It collected a great deal of it. The supervisory process frequently failed to classify what customers had already written.
Six Years, Then a Lookback
FINRA found that Merrill Lynch failed to accurately report thousands of written complaints contained in post-call survey responses and lacked a reasonably designed supervisory system for that reporting.
The firm received more than 220,000 written survey responses. It timely reported 2,423 complaints but failed to report more than 1,600 others.
Merrill Lynch suspended the written commentary field in its customer surveys after detecting the issue and conducting a lookback of 2023 responses.
The firm self-disclosed its failure to FINRA under Rule 4530(b).
FINRA accepted the settlement, which included a censure and a $225,000 fine.
Merrill Lynch resolved the outstanding complaints identified during its 2023 lookback and reported those complaints to FINRA. The regulator considered the self-disclosure, one-year review, resolution of identified complaints and subsequent reporting when determining the sanctions.
The AWC does not provide annual complaint totals for 2018 through 2022. It says the full-period reporting failure involved thousands of complaints, while supplying detailed counts only for the 2023 sample.
What FINRA Found and Imposed
FINRA found that Merrill Lynch violated Rule 4530(d) by failing to accurately report the required statistical and summary information. Because a Rule 4530(d) violation also violates Rule 2010—which requires high standards of commercial honor and just and equitable principles of trade—the regulator found a Rule 2010 violation as well.
FINRA also found violations of Rules 3110(a) and 3110(b). Those rules require firms to maintain a supervisory system and written procedures reasonably designed to achieve compliance with securities laws and FINRA rules. Here, the regulator concluded that Merrill Lynch’s system and procedures were not reasonably designed to identify reportable complaints in written survey responses.
Merrill Lynch accepted a censure and a $225,000 fine. It also waived the right to a disciplinary complaint, hearing and appeal through FINRA’s adjudicatory process, the Securities and Exchange Commission and a federal court of appeals.
The procedural distinction is important. Merrill Lynch did not admit or deny the findings, but it accepted and consented to them as part of the settlement. Under the agreement, the AWC becomes part of the firm’s permanent disciplinary record, and the firm may not publicly deny a finding or create the impression that the agreement lacks a factual basis.
The Operational Consequence
The settlement does not find that every unreported complaint reflected underlying customer harm, nor does it assign a financial loss to the affected customers. Its finding is narrower: reportable written complaints were not identified and submitted as required.
That narrower failure still matters. Complaint reporting gives a regulator the ability to see patterns across customers, representatives and business lines. A service complaint may be minor in isolation. Repeated complaints about fund access, documentation, technical failures or security incidents can look different when assembled into a regulatory dataset.
Here, thousands of grievances remained outside that reporting stream during the relevant period. The system’s vocabulary became a gatekeeper between what customers said and what the regulator could see.
What a Legitimate Fix Looks Like
Editorial analysisFINRA’s document identifies a familiar compliance failure: an organization created a listening channel, relied heavily on automated classification and did not adequately account for messages that the classifier failed to label. A durable response would address the process rather than merely expanding a keyword list.
Regulatory Track
- Regulators could require firms to validate complaint-detection tools against representative samples of both flagged and unflagged communications.
- Supervisory examinations could test whether every customer communication channel—including surveys, chat systems and feedback forms—feeds into complaint reporting.
- Firms using automated triage could be expected to document false-negative testing: the messages the system missed, not only the ones it caught.
Corporate Governance Track
- Compliance teams should use terminology tailored to the regulated business rather than importing a lexicon created for another product line.
- Human reviewers should receive the same clear complaint-identification guidance whether or not software applies a preliminary flag.
- Management reporting should separately track flagged responses, unflagged samples, confirmed complaints and reporting deadlines so that classification gaps become visible.
Customer Access Track
- Fixing compliance should not require eliminating a useful avenue for written feedback indefinitely. A replacement channel should preserve customer access while routing grievances into trained review.
- Customers should receive clear information about how to submit account grievances and obtain follow-up, regardless of whether their first message arrives through a survey.
What to Watch
- FINRA: The AWC states that the sanctions become effective on a date set by the regulator and that payment is due after notice.
- Merrill Lynch: The source says the firm suspended written survey commentary in January 2024. It does not say whether that feature was later restored or replaced.
- Complaint supervision: Future disclosures may show whether the firm adopted broker-dealer-specific review terms, systematic sampling of unflagged responses or another detection method.
- The public record: The AWC does not break out annual totals for the unreported complaints from 2018 through 2022 or describe each complaint’s resolution.
The accepted settlement resolves FINRA’s disciplinary matter based on these factual findings, but it leaves an information gap around the earlier years and the long-term design of the replacement process. The central governance issue is concrete: whether every channel that invites customers to speak is connected to a system capable of recognizing what they are saying.
The source document for this investigation is attached below.
You can find a copy of the above FINRA publication by visiting: https://www.finra.org/sites/default/files/fda_documents/2024081776401%20Merrill%20Lynch%2C%20Pierce%2C%20Fenner%20%26%20Smith%20Incorporated%20CRD%207691%20AWC%20vrp.pdf
