Take a look at the following posts: Merit & new rank requirements and re: Who can award merits?.

The first of the threads is the official forum thread concerning merits and their relation to ranks. On the second post I focus on explaining the difference between merits and sMerits, and the origin of the latter. What the post states still remains true, with the amendment related to Merit Sources and the amount of sMerit they have: the current correct data is "There are 120 merit sources with a total merit generation of up to 22055 sMerit per 30 days".