Legal Question in Banking Law in California

Thank you for this opportunity. I have Cisco shares - once held by Q & R, then B of A and now Merrill Lynch. In other words, I started wise - with the �no to low fee� Q & R (and then thrown out to the wolves). In 2005, I sold part of the stock value, which - unbeknownst to me - placed my stock holding account into a maintenance fee amount - having less than a certain number of stock shares.

Yes, I am guilty of skimming my stock statement, but in reviewing the last few years, nowhere did it, or does it now, state, "You owe us $## in maintenance fees�. Well, in October of last year, Merrill L. sold 18 shares of my stock to pay for $400 back account maintenance fees 2006-09 ($100 a year - and other than mailing out quarterly statements, there is nothing to maintain) without first informing me.

I called to express my feelings and told them I would have easily paid the fee by check or even cash and not my stocks, had I first known. Well, I guess I wasn�t mad enough because last month they, once again, before informing me, sold stock value to pay the maintenance for the first half of 2010. Now, I am (apparently) being taxed on this amount (1099-B �broker bartering� or something like that).

Question (finally): Is it legal for Merrill Lynch to do this; to sell a client�s stock to pay for account fees without the client�s prior knowledge so that they can be paid by other means?

Thanks again.

- Andrew.


Asked on 4/06/10, 3:43 am

1 Answer from Attorneys

Probably. You would need to read your account agreement and any amendments to it. I suspect it specifically says they can do that without notice. I suggest you move your account, and read everything carefully at your new broker. Personally I like eTrade, but they do have a "without notice" clause in their agreement. I had shares sold on me on a margin call due to a very temporary dip in my stock value. Really pissed me off, but had I been checking my account daily, I would have caught it. Most brokerages have some kind of clause like that and it is legal.

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Answered on 4/11/10, 12:09 pm


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