The Financial Industry Regulatory Authority fined two Merrill Lynch companies US $ 6 million in aggregate for not complying with certain requirements related to short sales (Regulation SHO) as well as supervisory failures. The two Merrill Lynch entities are Merrill Lynch Professional Clearing Corporation (ML Pro) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (ML). In general, Regulation SHO requires a firm to close out short sales where an account has failed to deliver the required security by certain deadlines. Close-out is achieved by the firm borrowing or purchasing the relevant security. According to FINRA, from September 2008 through July 2012, ML Pro did not close out certain fail-to-deliver positions as required, and did not have adequate systems and procedures to address Regulation SHO’s close-out requirements. In addition, from September 2008 through March 2011, FINRA claimed that ML’s supervisory systems and procedures were also inadequate and permitted the firm to allocate fail-to-deliver positions to customers based on their short position without regard to which customers actually caused the firm’s fail-to-deliver position. FINRA also cited both Merrill Lynch companies for anti-money laundering violations, and ML Pro, for books and records violations, and for not adequately monitoring the order flows of certain of its clients whom it permitted  to trade directly through certain market centers (so-called “sponsored access” clients). Both Merrill Lynch companies agreed to this settlement without admitting or denying any of FINRA’s findings.