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PCAOB announces $1 million settlement with PWC

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PricewaterhouseCoopers
Investment   Compliance with the SEC Customer Protection Rule

The Public Company Accounting Oversight Board announced that it censured and imposed a $1 million civil penalty against PricewaterhouseCoopers (PWC) for violations in its examination and audit of Merrill Lynch, Pierce, Fenner & Smith, Incorporated's compliance with the Securities and Exchange Commission's Customer Protection Rule in fiscal year 2014.


The SEC's Customer Protection Rule requires a broker-dealer to hold certain customer securities in lien-free segregated accounts to protect them from creditor claims should the broker's business fail.

Merrill Lynch reported that it had complied with the rule in fiscal year 2014 and that its internal control over compliance with the rule was effective.

The Board found that, in February 2015, PwC issued audit and examination reports without obtaining sufficient evidence about Merrill's compliance assertions, as required by PCAOB auditing and attestation standards.

In June 2016, the SEC found that for several years, including fiscal year 2014, Merrill Lynch held tens of billions of dollars of its customers' fully paid and excess margin securities in accounts that were subject to liens by third parties, in violation of the Customer Protection Rule.

PwC consented to the Board's order without admitting or denying the findings in the order.


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