WASHINGTON — The Financial Industry Regulatory Authority fined five firms $255,500 and sanctioned an individual for violations of municipal securities rules.
The fines and firms included $35,000 for Lancaster Pollard & Co., $12,500 for Sweney Cartwright and Company, $6,000 for Brill Securities, Inc., and $2,000 for Andes Capital Group, LLC.
The cases were detailed in FINRA's monthly disciplinary actions, which also included a previously disclosed $200,000 fine against St. Louis firm L.J. Hart for improper gifts to issuer officials.
FINRA fined William Schloth, former chief executive officer at New York-based Southridge Investment Group LLC, $10,000 and suspended him for 22 months.
The firms neither admitted nor denied FINRA's findings but agreed to the sanctions.
Columbus, Ohio-based Lancaster Pollard committed various recordkeeping, reporting, and disclosure violations between 2006 and 2012. From July 31 through Nov. 28, 2008, FINRA found. The firm violated the Municipal Securities Rulemaking Board's Rule G-8 on books and records when it failed to establish customer accounts and prepare account records for 53 investment advisor and bank customers that purchased securities the firm had underwritten.
"Lancaster Pollard mistakenly believed that the investment advisory firms and banks were not defined as 'customers,'" FINRA said.
The firm incurred further G-8 violations by failing to prepare and maintain order memoranda for all of its muni transactions during that time period, mistakenly believing confirmations of the transactions sufficed, FINRA found. Lancaster Pollard violated Rule G-15 on confirmation when it inaccurately disclosed a 0% yield for 116 of 183 muni bond transactions between Jan. 1, 2010 and Dec. 31, 2010, the self-regulator said.
The firm violated Rule G-14 on reports of sales or purchases by failing to report at all or in a timely manner 63 transactions between Jan. 1, 2011 and Oct. 14, 2011, FINRA said. The firm also violated Rule G-32 on primary offering disclosure between Nov. 29, 2010 and Feb. 5, 2012 by failing to provide some customers with an official statement or to give them notice of where they could one.
Sweney Cartwright, also based in Columbus, violated G-32 by failing to properly file information to EMMA on 14 occasions between June 2009 and October 2011, FINRA investigators determined. The firm violated Rules G-8, G-11 on primary offering practices, and G-34 on CUSIP numbers during the review period, the self-regulator alleged. The firm recorded approximate times of formal awards rather than the exact time as required, settled with a fellow member of an underwriting syndicate 25 days late, and did not properly report time of first execution, according to the report.
FINRA also said the firm violated Rule G-27 on supervision by failing to maintain written procedures related to disclosure obligations. It also violated the Securities and Exchange Commission Rule 15c2-12 by not properly reviewing issuers' disclosure histories before underwriting their bonds.
"Those were technical errors, and no customers were injured whatsoever," said the firm's president Stephen Cartwright.
New York-based Brill Securities violated Rule G-30 on prices and commissions and G-17 on fair dealing by selling securities at unfair prices between Oct. 1, 2011 and Dec. 31, 2011.
Andes Capital Group, based in Chicago, failed to file forms G-37 on political contributions on time, and also failed to disclose in either the 4th quarter of 2009 or the second quarter of 2010, that it had participated in the underwriting of school bonds.
FINRA tagged Schloth, with violating G-27 by failing to implement a system to prevent a registered representative from having an improper business relationship with a "non-registered and statutorily disqualified" person between 2009 and 2011. Scloth was severed from Southridge in September 2011.
