WASHINGTON — The Financial Industry Regulatory Authority fined three firms a total of $57,500 for municipal bond trade reporting violations. The self-regulator also suspended a former broker-dealer cashier for six months for fictitious trades.
FINRA fined New York-based Barclays Capital, Inc. $35,000, Morgan Stanley Smith Barney in Baltimore $15,000, and Lisle, Ill.-based Oberweis Securities, Inc. $7,500.
It fined Joseph Philip Riggio from Leighton, Pa., a former head cashier at Murphy & Durieu, $10,000 and suspended him from June 1 through Nov. 30 of this year. Riggio's employment at the firm was terminated on June 19, 2013 and FINRA suspended his fine until he either requests relief from statutory disqualification or joins another firm, whichever is earlier.
FINRA reported the violations and sanctions in its latest monthly disciplinary report. The firms and Riggio neither admitted nor denied the self-regulator's findings but agreed to the sanctions. Neither the firms nor Riggio could be reached for immediate comment.
Barclays had been sanctioned in 2013 for earlier muni trade reporting violations. These latest violations occurred during the last two quarters of 2013. FINRA found that, during the third quarter of that year, the firm failed to accurately report the correct time of trade in 26 or 3.11% of its 836 interdealer trades. It also did not report information within 15 minutes of execution, as required, for 31 or 3.7% of the 836 interdealer trades, FINRA said.
During the last half of 2013, the firm failed to report the correct time of trade and timely data for 113 or 5.59% of 2,020 customer trades. It also failed to report the correct capacity in which it acted in 87 trade reports, FINRA said.
The self-regulator said Barclays violated Municipal Securities Rulemaking Board Rules G-14 on trade reporting and G-8 on books and records.
Morgan Stanley's fine was part of an overall $225,000 fine that included short sale and corporate bond trade reporting, as well as muni bond reporting, violations. The firm was previously sanctioned in 2012, 2013, and 2014 for violating muni trade reporting rules.
In this latest action, FINRA found that, during the first quarter of 2013, the firm failed to report the correct time of trade execution for 70 or 2.8% of its reported trades and did not timely report 32 of those trades. As a result, the firm violated Rule G-14 on trade reporting, FINRA said.
The self-regulator found Oberweis failed to timely report data on 187, or 2.12%, of muni trades during the fourth quarter of 2013, in violation of Rule G-14.
FINRA said Riggio violated its Rule 2010. The firm that Riggio worked for at that time was an interdealer broker that self-cleared its muni bond trades through the Depository Trust & Clearing Corp.
The firm's trading was limited by the amount of collateral it had on deposit with the DTCC so that it could not incur a net balance in excess of its assigned net debit cap.
Riggio was responsible for monitoring the DTCC debit cap for the firm and inputting electronic entries into the participant terminal system (PTS), including orders to deliver securities. According to FINRA, Riggio, on 40 occasions in 2012, made fictitious entries for the delivery of stock to evade the net debit cap so the firm would be seen as having enough collateral to process pending muni bond trades. Riggio never intended to deliver the stock. He knew the counterparty firm to the trade would reject the transaction and cancel it prior to settlement, FINRA said.
