SEC v. Merrill Lynch (naked short selling debate, 2015)

Settled

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In June 2015 the Securities and Exchange Commission settled an administrative order with two Merrill Lynch entities, in which Merrill admitted that it broke the locate rule (Regulation SHO Rule 203(b)) by executing short sales on the strength of stale or unreliable easy-to-borrow lists. The order requires a $9 million penalty, $1,566,246 disgorgement and $334,565 interest.

The record

What was ordered

Civil penalty

$9m

Disgorgement

$1.6m

Prejudgment interest

$335k

Total relief

$10.9m

Alleged gain

—

A dash means the release did not state a figure we could extract, not that the figure is zero. Penalty and disgorgement are stored separately so aggregates across the library do not double-count the same dollars.

What is alleged to have happened

The Securities and Exchange Commission announced this matter on June 1, 2015 as release 34-75083. The respondents named are Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp. (0 individuals, 2 entities).

The order finds Merrill kept relying on easy-to-borrow lists as locates after its own lending desk would not have granted them, built lists from data more than 24 hours old, and recorded the wrong locate source. Merrill admitted the findings.

This library tags the matter as naked short selling debate, based on the conduct the regulator describes. Each tag links to a page explaining how that technique works, what statute it engages, and what penalties comparable actions have attracted. The tagging is ours, not the regulator's: agencies charge statutory provisions, not technique names.

The relief recorded in our data is a civil penalty of $9,000,000, disgorgement of $1,566,246 and prejudgment interest of $334,565. Penalty and disgorgement are distinct: disgorgement returns the gain, while the penalty is punitive. We store them separately so that aggregate figures across the library are not double-counted.

For the regulator's own account of the facts, read the primary document linked above. This page deliberately summarises the structured record rather than reproducing the release.

What technique is this, and how does it work?

This action is tagged with one technique in our taxonomy. The tagging is ours: regulators charge statutory provisions, not technique names, so the mapping is an editorial judgement described in our editorial policy.

• The naked short selling debate — see how it works, what statute it engages, and every other action tagged the same way.

Timeline

1. 2015-06-01 Administrative proceeding instituted (cease-and-desist)

Primary documents

Everything on this page derives from the documents below. Where our summary and the primary document disagree, the primary document is right.

• SEC order

The linked release is a work of the United States government and is not subject to copyright. Our summary and narrative above are our own writing.

Related actions

Other actions in the library sharing at least one technique tag with this one.

Record added September 10, 2026. submit a correction.