WASHINGTON — The Financial Industry Regulatory Authority fined a dealer firm and fined and suspended an individual for violations of Municipal Securities Rulemaking Board rules, FINRA revealed in its monthly disciplinary report for May.
FINRA fined Jersey City, N.J.- based Dealerweb, an electronic platform offered by Tradeweb, $20,000 dollars for misreporting 16,678 municipal securities trades between July 2013 and September of that same year. Dealerweb agreed to pay the fine and to be censured while neither admitting nor denying FINRA's findings.
FINRA found that the firm violated MSRB Rule G-14 on reports of sales or purchases because it reported the trades as agency transactions, when in fact the firm was acting in a riskless principal capacity. Agency trades are done for customers, while principal transactions aim to create a profit for the firm's own portfolio. The firm did not respond to a request for comment.
In a separate action, FINRA fined and suspended Armen Bahadourian, then of UnionBanc in Los Angeles, for violating the MSRB's Rule G-17 on fair dealing in late 2012 by executing 15 unauthorized muni transactions in nine customer accounts.
While neither admitting nor denying FINRA's findings, Bahadourian agreed to pay a fine of $10,000 and to disgorge $6,880.75 in ill-gotten commissions, plus interest. He also agreed to be suspended from association with any FINRA member firm for 18 months, until Oct. 5 2016.
FINRA examiners found that between Oct. 5 2012 and Dec. 18 2012, Bahadourian purchased municipal bonds totaling about $1 million without the knowledge or consent of his customers. The MSRB's fair-dealing rule prohibits dealers from engaging in any "deceptive, dishonest, or unfair" behavior.
Bahadourian could not be reached for comment. FINRA records show that he left UnionBanc in January 2013 and was a registered broker with McNally Financial Services Corp. in San Antonio, Tex. from April through August of 2014. He was not registered with any firm when he agreed to the settlement with FINRA in February.
FINRA enforces MSRB rules under the oversight of the Securities and Exchange Commission and shares the monetary penalties it collects from muni disciplinary actions with the MSRB. Last week FINRA announced that it may be getting tougher on alleged rule violators in the future, when its National Adjudicatory Council proposed significant increases in the highest level of fines for disciplinary actions and tougher sanctions for cases involving fraud and recommendations of unsuitable investments.
