The Financial Industry Regulatory Authority fined five firms $191,250 for municipal securities rule violations and ordered them to disgorge thousands more of ill-gotten gains.
The firms and fines included: Southwest Securities, Inc., at $95,000; Raymond James & Associates, Inc., at $75,000; Seattle-Northwwest Securities Corp., at $10,000; KJM Securities, Inc., at $6,250; and Knight Libertas, LLC, at $5,000.
FINRA regulators said that between Oct. 1, 2008 and Jan. 9, 2009, as well as from July 1, 2009 and Sept. 30, 2009, Dallas-based Southwest Securities violated Municipal Securities Rulemaking Board rules G-17 on fair dealing and G-30 on prices and commissions eight times by buying and selling muni securities for its own account from or to customers at prices that were “not fair and reasonable.”
The firm also violated the MSRB’s supervisory Rule G-27 by not having a system in place “reasonably designed to achieve compliance.” The firm had no written procedures describing the steps to be taken by a person responsible for helping to ensure compliance, according to FINRA. The self regulator also levied penalties against the firm for corporate securities violations, and ordered that they pay restitution totaling $32,167.14 to customers for the excessive muni and corporate security markups and markdowns. Southwest neither admitted nor denied the findings in its letter of acceptance. The firm could not be reached for comment.
St. Petersburg, Fla.-based Raymond James also violated those rules by applying unfair markups and markdowns on 37 transactions between Oct. 1, 2008 and Dec. 31, 2008, FINRA said.
In addition to the $75,000 of fines, the firm also agreed to pay restitution to the tune of $25,603.28 plus interest. The firm neither admitted nor denied the findings, and did not respond to a request for comment.
FINRA flagged Seattle-based Seattle-Northwest Securities for inaccurately reporting the M020 Special Condition Indicator to the Real-Time Transaction Reporting System in 242 transactions between July 1, 2010 and Dec. 31, 2010. Those transgressions constituted violations of MSRB rule G-14 on reports of sales or purchases. The firm agreed to a censure in addition to its $10,000 fine, without admitting or denying FINRA’s findings.
FINRA investigators uncovered 28 instances of unfair mark-ups and mark-downs committed by Bronxville, N.Y.-based KJM between Nov. 21, 2008 and Dec. 7, 2009, the authority said, violating rules G-17 and G-30. The firm was cited last year for similar violations that took place between November 2008 and December 2009, according to a FINRA complaint, and forced to pay restitution and disgorge ill-gotten gains.
“KJM charged markups ranging from 3.15% to 4.99% on 26 muni bond transactions and markdowns of 3.05% and 3.55% on two other municipal bond transactions,” according to an Order Accepting Offer of Settlement.
FINRA also cited KJM for supervisory violations and failure to maintain adequate capital relative to its indebtedness.
The firm agreed to $20,000 of fines, $6,250 of which were for municipal bond rules violations, a $5,000 fine, and 20-business day suspension against KJM president and chief executive official Kosta Moustakas, as well as $14,424.16 plus interest in restitution for customers.
KJM and Moustakas neither admitted nor denied FINRA’s findings. The firm declined to comment.
Greenwich, Conn.-based Knight Libertas was fined for 54 instances of failure to report trades to RTRS within 15 minutes as required by G-14. The violations took place between July 1, 2010 and Sept. 30, 2010 and represented 17% of the transactions the firm reported during that period, according to FINRA.
The firm also agreed to pay fines for violations of corporate securities and books and records rules, but neither admitted nor denied the findings. Knight Capital Group did not respond to a request for comment.
