The US Securities and Exchange Commission has ordered Merrill to return more than $10.5 million to harmed customers. It must also pay penalties of approximately $5.2 million.

Merrill Lynch, Pierce, Fenner & Smith will pay the amounts to settle charges that its employees misled customers into overpaying for residential mortgage-backed securities.

In its order, the SEC says that Merrill Lynch's traders and salespeople convinced the bank’s customers to overpay for these securities by deceiving them about the price that Merrill Lynch paid to acquire them. These traders and salespeople also illegally profited from excessive, undisclosed commissions – called lpmark-ups – which in some cases were more than twice as much as the customers should have paid. According to the SEC’s order, Merrill Lynch failed to have compliance and surveillance procedures in place that were reasonably designed to prevent and detect the misconduct that increased the firm’s profits to the detriment of its customers.

Daniel Michael of the SEC Enforcement Division’s Complex Financial Instruments Unit accused Merill Lynch staff of “lying to customers about the acquisition price.”