Finra arbitrators have ruled in favor of Merrill Lynch in a claim brought by one of its former managers who accused the wirehouse of racketeering in connection to its activity in the market for residential mortgage-backed securities and collateralized debt obligations, according to the industry’s self-regulator.

Brian Sepe “was a decorated, long-term employee of [Merrill Lynch] who rose through the ranks of management and was, at some point, in charge of, and had responsibility for, one-sixth of the United States” at Merrill Lynch, Finra says.

In 2018, Brian Sepe and his wife Dawn Sepe filed a claim against Merrill Lynch alleging the existence of an offshore scheme that violated the Racketeer Influenced and Corrupt Organizations (RICO) Act, failure to disclose wrongful actions, breaches of duty and contract and other violations, according to an award document published by Finra.

The claim was related to Brian Sepe’s compensation at the wirehouse, including his incentive stock options, some of which expired worthless, and shares in the company stock, according to the award document.

According to his LinkedIn profile, Brian Sepe’s most recent role at Merrill Lynch until December 2010 was head of Latin America and Canada wealth management. Before that, he was managing director of the Northeast division.

The Sepes sought compensatory and punitive damages, disgorgement of allegedly ill-gotten gains, treble damages and lawyers’ fees and costs, Finra says.

The Sepes claimed that the six-year filing period normally applicable to such claims should be delayed because the fraudulent activity wasn’t known to Brian Sepe until 2014, when Bank of America, Merrill Lynch’s parent company, agreed to a $16.65 billion settlement with the U.S. Department of Justice related to its activity in the RMBS and CDOs market.


Brian Sepe added his wife to the claim because the accounts in question were joint accounts, Finra says.

Last week, the arbitrators dismissed the Sepes’ claim. The panel ruled that the six-year filing period did indeed apply to them, in part because of Brian Sepe’s “upper management position” as well as his participation in a previous ERISA claim against the wirehouse, according to the award document.

“Claimant Brian Sepe was highly experienced in the industry and chose to not concern himself with prior claims against Respondent, news, books, and articles regarding allegations of fraud against Respondent that would have put him on notice of the alleged fraud more than six years prior to the filing of this arbitration,” the arbitrators wrote.

In addition, the panel dismissed the claim that the option expiration constituted a new loss, since there were no allegations of the options having any value, Finra says. The arbitrators also ruled that the arguments to dismiss Brian Sepe’s claim applied to Dawn Sepe as well, according to the award document.