UNITED STATES OF AMERICA

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934

Release No. 104851 / February 17, 2026

ADMINISTRATIVE PROCEEDING

File No. 3-22173

In the Matter of

Merrill Lynch, Pierce Fenner &

Smith Incorporated,

Respondents.

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ORDER APPROVING

PLAN OF DISTRIBUTION

ADMINISTRATIVE PROCEEDING

File No. 3-22174

In the Matter of

Harvest Volatility Management

LLC,

Respondent.

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On September 25, 2024, the Commission issued two separate but related Orders (the

“Orders”) against Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”),1 a

registered broker-dealer and investment adviser, and Harvest Volatility Management LLC

(“Harvest Volatility”), 2 a registered investment adviser (collectively, the “Respondents”).

In the Orders, the Commission found that from March 2016 to April 2018 (the “Relevant

Period”), Merrill Lynch referred certain clients to a third party investment adviser, Harvest

Volatility, to manage an option overlay strategy, more specifically, Harvest Volatility’s

Collateral Yield Enhancement Strategy (“CYES”), pursuant to the terms of an Investment

Order Instituting Administrative and Cease-and-Desist Proceedings, Pursuant to Section 15(b) of the Securities

Exchange Act of 1934 and Sections 203(e) and 203(k) of the Investment Advisers Act of 1940 (“Advisers Act”),

Making Findings, and Imposing Remedial Sanctions and a Cease-and Desist Order, Exchange Act Rel. No. 101158

(Sept. 25, 2024) (Admin. Proc. File No. 3-22173).

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Order Instituting Administrative and Cease-and-Desist Proceedings, Pursuant to Sections 203(e) and 203(k) of the

Investment Advisers Act of 1940, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist

Order, Advisers Act Rel. No. 6726 (Sept. 25, 2024) (Admin. Proc. File No. 3-22174).

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Management Agreement (“IMA”). In the Orders, the Commission found that Harvest Volatility

purchased and sold options contracts at levels materially above the levels clients authorized in

the IMA. By failing to comply with the IMA, Harvest Volatility caused hundreds of clients to be

over exposed to the strategy, resulting in higher fees and, during certain periods, financial losses.

As a result, Harvest Volatility willfully violated Section 206(2) of the Advisers Act. Harvest

Volatility also failed to adopt and implement written compliance policies and procedures

reasonably designed to prevent violations of the Advisers Act and the rules thereunder in

connection with its execution of CYES with respect to authorized notional amounts. As a result,

Harvest Volatility willfully violated Section 206(4) of the Advisers Act and Rule 206(4)-7

thereunder.

The Commission further found that Merrill Lynch knew or reasonably should have

known that certain clients' actual investment levels exceeded the dollar amount designated and

agreed upon between the clients and Harvest Volatility and its failure to adequately notify certain

clients of their over-exposure breached its fiduciary duties to those clients and therefore willfully

violated Sections 206(2) and 206(4) of the Advisers Act and Rule 206(4)-7 thereunder.

In their respective Orders, the Commission ordered Merrill Lynch to pay $2,000,000.00

in disgorgement, $800,000.00 in prejudgment interest, and $1,000,000.00 in civil money penalty;

and Harvest Volatility to pay $2,500,000.00 in disgorgement, $1,000,000.00 in prejudgment

interest, and $2,000,000.00 in civil money penalty, for a collective total of $9,300,000.00, to the

Commission. In each of the Orders, the Commission created a Fair Fund, pursuant to Section

308(a) of the Sarbanes-Oxley Act of 2002, so the penalties collected, along with the

disgorgement and prejudgment interest collected, can be distributed to harmed investors, and

further ordered that it may be added to or combined with any other fund established in any

related action arising out of the same facts.

The Respondents have paid in full. In accordance with the Orders, the Fair Funds

collected from the Respondents have been combined (collectively, the “Fair Fund”). The assets

of the Fair Fund are subject to the continuing jurisdiction and control of the Commission. The

Fair Fund has been deposited in a Commission-designated account at the U.S. Department of the

Treasury, and any interest accrued will be added to the Fair Fund.

On December 17, 2025, the Division of Enforcement, pursuant to delegated authority,

published a Notice of Proposed Plan of Distribution and Opportunity for Comment (“Notice”), 3

pursuant to Rule 1103 of the Commission’s Rules on Fair Fund and Disgorgement Plans

(“Commission’s Rules”);4 and simultaneously posted the Proposed Plan of Distribution (the

“Proposed Plan”). The Notice advised interested persons that they could obtain a copy of the

Proposed Plan from the Commission’s public website or by submitting a written request to

Devon Brown, United States Securities and Exchange Commission, 100 F Street, NE,

Washington, DC 20549-5876. The Notice also advised that all persons desiring to comment on

the Proposed Plan could submit their comments, in writing, within 30 days of the Notice. The

Commission received no comments on the Proposed Plan during the comment period.

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Exchange Act Rel. No. 104426 (Dec. 17, 2025).

17 C.F.R. § 201.1103.

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The Proposed Plan provides for the distribution of the Net Available Fair Fund 5 to those

investors, based on the management fees paid to the Respondents for investments in the

Collateral Yield Enhancement Strategy (the “Security” or “CYES”) that exceeded contractual

limits during the Relevant Period as calculated by the methodology used in the plan of allocation

outlined in the Plan.

Plan.

The Division of Enforcement now requests that the Commission approve the Proposed

Accordingly, it is hereby ORDERED, pursuant to Rule 1104 of the Commission’s

6 that the Proposed Plan is approved, and the approved Plan of Distribution shall be posted

Rules,

simultaneously with this order on the Commission’s website at www.sec.gov.

For the Commission, by the Division of Enforcement, pursuant to delegated authority. 7

Vanessa A. Countryman

Secretary

All capitalized terms used herein but not defined shall have the same meanings ascribed to them in the Proposed

Plan.

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17 C.F.R. § 201.1104.

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17 C.F.R. § 200.30-4(a)(21)(iv).

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