BofA's Merrill Lynch unit fined for failing to disclose note fees

A worker washes windows high atop the Merrill Lynch building in downtown San Diego, California September 1, 2015. REUTERS/Mike Blake

(Reuters) - Bank of America Corp’s Merrill Lynch unit will pay a $10 million penalty to settle charges its offering materials for a risky type of note misled investors, the U.S. Securities and Exchange Commission said on Thursday.

The offering materials did not adequately disclose a quarterly 1.5 percent cost within a volatility index linked to the note, for which investors would be responsible, the SEC said.

The Financial Industry Regulatory Authority (FINRA) separately fined Merrill $5 million for negligent disclosures related to the sale of five-year senior debt notes to retail customers, the regulator said on Thursday.

The Wall Street industry-funded watchdog said it found Merrill had sold about $168 million worth of the notes to its retail customers but did not clearly disclose certain costs, making it appear that fixed costs were lower than they actually were.

Reporting by Suzanne Barlyn in Washington and Nikhil Subba in Bengaluru; Editing by Chizu Nomiyama