Nine Fined $129,500 by FINRA for Rules Violations

The Financial Industry Regulatory Authority fined nine firms a total of $129,500 for violations of muni trade reporting, pricing, book-keeping, record-keeping, and supervisory rules.

The sanctions were included in the monthly disciplinary actions announced by FINRA on Tuesday.

The largest fine, $25,000, was levied against New York-based BNY Mellon Capital Markets for trade reporting and pricing violations. Charlotte, N.C.-based Wells Fargo Institutional Securities LLC was next with a $20,000 fine for violating rules for reporting trades, book and record-keeping, as well as supervisory rules.

FINRA fined Far Hills, N.J.-based Emmett & Co. and Memphis-based Vining Sparks $17,500 each for trade reporting violations. Wilmington Capital Securities LLC, in Garden City, N.Y., and B.C. Ziegler and Co. in Chicago were each fined $12,500 for violating trade reporting and supervisory rules.

The former Merrill Lynch, Pierce, Fenner & Smith Inc., now Bank of America Merrill Lynch, was fined $12,000 and ordered to pay restitution of $5,691 to customers for violating fair dealing and pricing rules.

The self-regulator fined Infinex Investments Inc. in Meriden, Conn., $7,500 for books and records as well as supervisory rule violations.

It fined Morgan Keegan & Co. in Memphis $5,000 for muni trade reporting rule violations.

The firms, whose officials either would not comment or could not be reached for comment, neither admitted nor denied the findings but agreed to the sanctions.

According to FINRA, between April 1 through June 30, 2008, BNY Mellon failed to report the correct trade date for 228 transactions and improperly reported trade information on 453 occasions in violation of the Municipal Securities Rulemaking Board’s Rule G-14 on trade reporting.

In five transactions, the firm violated MSRB Rule G-17 on fair dealing and G-30 on prices by failing to purchase muni securities for its own account from a customer at a price “that was fair and reasonable, including the expense involved, the total dollar amount of the transaction, and that the firm was entitled to a profit.”

The firm also failed to have an adequate supervisory system to ensure compliance with trading report requirements in violation of G-27 and was ordered to revise its procedures.

The bank issued two separate statements describing mitigating circumstances for some of the violations, noting for example that there was some miscommunication between BNY Mellon and some unit investment trusts as well as that one order-ticket fee was inadvertently miscalculated.

FINRA said that, between July 1 and Sept. 30, 2009, Wells Fargo failed to report the correct time of trade for 48 transactions and also did not include a special indicator and or report some of the trades within 15 minutes of execution under G-14.

It also failed to report the correct time of execution for 25 transactions in violation of Rule G-8 on books and records and did not have supervisory procedures. FINRA ordered the firm to revise is supervisory procedures.

The self-regulator said that between July 1 and Sept. 30, 2009, Emmet failed to report 85, or 2%, of its interdealer transactions within 15 minutes of execution, as is required by G-14. The firm also did not report the correct time of execution or time of trade in violation of rules G-14 and G-8. 

Vining Sparks, between April 1 and June 30, 2009, failed to report 107, or 3%, of its interdealer transactions within 15 minutes of execution and did not report the correct times of execution or trade, according to FINRA.

Between Oct. 1 and Dec. 31, 2009, Wilmington Capital failed to report 71, or 5.5%, of all of its reportable transactions, within 15 minutes of execution and did not have adequate supervisory procedures to assure compliance with MSRB trade reporting rules.

The firm was directed to revise its supervisory procedures.

FINRA said that B.C. Ziegler, from Oct. 1 through Dec. 31, 2008, did not report 240, or 2%, of its reportable muni transactions within 15 minutes of execution and failed to provide evidence that it had performed adequate supervisory reviews.

The firm released a Statement of Corrective Action noting that during the fourth quarter of 2008, its sales and trading group nearly tripled in size.

The firm said it has instituted several new internal controls to provide enhanced oversight of trade reporting.

The Merrill Lynch muni rule violations occurred between July 1 and Sept. 30, 2007. In eight transactions the firm purchased munis for its own account or sold munis from its own account to customers at an aggregate price “that was not fair and reasonable, taking into consideration all relevant factors,” in violation of G-17 and G-30, FINRA said.

Infinex, between Nov. 1, 2008, and Jan. 31, 2009, failed to maintain adequate order tickets for 45 transactions in violation of G-17 and G-8.

In addition, the firm did not maintain its order ticket information in an easily accessible place for two years, in violation of G-9, and failed to have an adequate supervisory system, FINRA said.

Between Jan. 1 and June 30, 2007, Morgan Keegan failed to report correction information for 250 transactions.

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