Hedge fund managers may choose to route trades to dark pools and other trading venues in order to conceal the source of an order or to avoid revealing sensitive strategy information. A recent SEC settlement order reveals that, for five years, Merrill Lynch, Pierce, Fenner & Smith Incorporated (Merrill Lynch) intentionally hid from certain customers the fact that it was routing portions of their trades – approximately 15.8 million customer orders – to other broker-dealers known as external liquidity providers or electronic liquidity partners. The action is yet another reminder of the need for fund managers to conduct initial and ongoing due diligence on their counterparties to identify problematic behavior. This article reviews the facts and circumstances leading up to the $42‑million settlement. For coverage of another recent enforcement action against Merrill Lynch, see “$16‑Million Enforcement Action Against Merrill Lynch Demonstrates SEC’s Continued Pursuit of Misleading Broker Sales Talk and Excessive Markups in Mortgage-Backed Securities Trading” (Jul. 19, 2018).