Vernon Litigation Group Pursues Claim Against Merrill Lynch

NAPLES, Fla., Sept. 1, 2016,/PRNewswire/ — Vernon Litigation Group recently filed a claim against prominent securities broker-dealer Merrill Lynch. This claim follows a $10 million settlement that Merrill Lynch entered into with the SEC regarding Merrill Lynch’s failure to adequately disclose certain fixed costs and fees in a proprietary volatility index-linked to structured notes (known as Strategic Return Notes).

Volatility products are sold to both retail and institutional clients and are complex financial instruments.  The SEC noted that Merrill Lynch “offered and sold approximately $150 million of these volatility notes to approximately 4,000 retail investor accounts in 2010 and 2011.”  The SEC found that Merrill Lynch’s offering materials were misleading and made it appear as if the product had relatively low fixed costs when, in reality, there was another fixed, regularly occurring cost.

According to the claim filed by Vernon Litigation Group, two financial advisors who worked for Merrill Lynch and who were involved in this case were the whistleblowers who helped the SEC pursue its investigation against Merrill Lynch over the fixed cost and fee issues.  When the advisors realized the representations of Merrill Lynch regarding these Strategic Return Notes were not accurate, the advisors suggested that the clients sell their investment at a loss, recognizing that there was something “structurally wrong” with how the investment was working.

Vernon Litigation Group’s claim asserts that Merrill Lynch failed to:

Adequately disclose the fees and costs of the product and its impact on performance; Follow regulatory rules and guidelines; Provide material facts and/or omitted or misrepresented those facts to Claimants; Place Claimants’ best interests above their own; and recommend an investment only after studying it sufficiently.

The structured product industry is a money-making machine for Wall Street.  According to the Wall Street Journal, banks sell $40 billion to $50 billion of structured notes each year.  But, from the investor’s perspective, structured notes and other structured products are burdened with costs and risks that far outweigh the benefits.  Vernon Litigation Group has written extensively on the risks and other problems inherent in structured products.

The structured product involved in this case, called Strategic Return Notes, highlights this reality.   The Strategic Return Notes were linked to a Merrill Lynch index that was supposed to track the volatility of the S&P 500.  According to attorney Chris Vernon of Vernon Litigation Group, these synthetic products contain inherent design flaws that negate the credibility of Wall Street’s assertion that “market conditions” are to blame when investors lose big on these products.   It is inconsistent for firms such as Merrill Lynch to claim a wealth of market and investment knowledge as a sales tool and then claim being on the wrong side of the market was not foreseeable when the investor realizes they have been duped.

In the current FINRA arbitration claim against Merrill Lynch, the attorneys from the Vernon Litigation Group have demanded punitive damages as well as compensatory damages as a result of the institutional-based wrongdoing.


Vernon Litigation Group is based in Naples, Florida, with additional offices in Orlando, Florida, and Atlanta, Georgia. Vernon Litigation Group’s mission is to assist in the recovery of client losses caused by financial fraud and negligence. Vernon Litigation Group handles investment-related disputes involving securities such as bonds, hedge funds, annuities, and mutual funds. Its financial litigation and arbitration services help investors fight against negligent and fraudulent advisors, brokers, broker-dealers, and insurance companies.

For more information, contact:

Vernon Litigation Group

Phone: (239) 319-4434 E-mail:

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