WASHINGTON - The Financial Industry Regulatory Authority ordered seven broker-dealer firms to pay a total of more than $90,641 to settle charges of muni trade reporting failures and excessive markups, as well as engaging in muni business without qualified personnel.
The sanctions were included in FINRA's latest monthly disciplinary actions released on Monday.
Ft. Lauderdale, Fla.-based Newbridge Securities Corp. was fined $22,000. Purchase, N.Y.-based Morgan Stanley Smith Barney was ordered to pay a total of $15,141. New York-based Roosevelt & Cross, Inc. was fined $15,000. Rye Brook, N.Y.-based Belle Haven Investments was ordered to pay a total of $13,500.
New York-based Rice Securities, doing business as Rice Financial Products Co., was fined $12,500. Monument, Colo.-based Advisors Asset Management Inc. was fined $10,000. Southold, N.Y.-based The Dratel Group, Inc. was fined $2,500 in part of a larger case involving a suspension for the owner and a statutory disqualification of the firm, meaning it cannot continue to do business with permission from FINRA.
The firms neither admitted nor denied the findings but accepted the settlements. Except for Morgan Stanley, spokespersons or officials from firms either could be reached for comment or declined to comment.
FINRA found that Newbridge, from July 1, 2013 through Dec. 31, 2013 failed to report information on 70, or 22% of its, muni trades within 15 minutes of execution as required. The firm also failed to show the correct time of trade or the memorandum of brokerage orders and did not have an adequate supervisory system to comply with Municipal Securities Rulemaking Board rules, FINRA said. The self-regulator charged the firm with violating MSRB Rules G-14 on trade reporting, G-8 on books and records and G-27 on supervision.
FINRA fined Morgan Stanley $12,500 and ordered it to pay $2,641.16 in interest in restitution to investors from seven pairs of transactions in the second quarter of 2012 in which it sold munis for its own account to customers at excessive markups, ranging from 3.2% to 7.7%. The self-regulator said the firm violated MSRB Rules G-17 on fair dealing and G-30 on prices and commissions. The firm previously was fined $650, 000 for fixed-income pricing violations that occurred between Jan. 1, 2009 through Dec. 31, 2010, FINRA said.
A spokesman for the firm said, ""Morgan Stanley is happy to have resolved this matter. The settlement relates to a small handful of trades over three years ago executed before the full integration of the MSSB joint venture."
Roosevelt & Cross's violations of G-14 on trading reporting, G-15 on confirmation, clearance and settlement, and G-27 occurred from July 1, 2013 through Sept. 30, 2013, FINRA said. The firm failed to report the correct yield in 23 trade reports and failed to provide written notification to customers disclosing the accurate yield in 22 trades, according to the self-regulator. The firm also did not have an adequate supervisory system, FINRA said.
Belle Haven Investments violated muni trade reporting and books and records rules from July 1, 2013 through Sept. 30, 2013, FINRA said. During the third quarter of 2013, the firm failed to report 1,525, or 6.58%, of its trades within 15 minutes of execution as required. During the second half of 2013, the firm did not report the correct time of trade to the MSRB in 150, or 0.41%, of trades. FINRA said Belle Haven also did not report information on 143, or 0.39%, of trades according to reporting procedures. In addition, the firm failed to show the correct time of execution on memorandum for 150 muni trades. FINRA also hit the firm with fines for corporate trade reporting violations.
Regarding Rice Financial Products, FINRA said that from Feb. 15, 2011 through Aug. 3, 2011, a person not registered as a municipal securities representative transacted business with at least four muni issuers in violation of the MSRB's Rule G-3 on professional qualification requirements. In addition, the firm's written supervisory procedures did not state that registration as a muni securities representative was required for persons engaging in financial advisory on consultant services with issuers in connection with munis, in violation of G-27.
The muni violations were part of a bigger case that involved, among other things, a registered rep of the firm using a personal email address for business-related email correspondence that was not retained for books and records.
FINRA found that Advisors Asset Management, from July 1, 2013 through Dec. 31, 2013, failed to report correct information in reports on 1,111 or 11% of its trades with customers. The firm did not report: the correct time of transaction in 26 trades; the correct time, price and commission in 33 trades; and the correct price and commission in 1,032 trades. The self-regulator said these failures violated G-8 and G-15.
The Dratel Group and owner William Dratel were fined $2,500 jointly and severally for executing at least 23 municipal securities trades from February through May 2009 without being registered at the Municipal Securities Rulemaking Board and with having a registered municipal securities principal, according to FINRA's National Adjudicatory Council. The firm also violated G-14 when it failed to report the muni trades.
But the muni violations constituted only two of 11 violations that led the NAC, in agreement with an earlier ruling by FINRA's Office of Hearing Officers, to fine the firm and/or Dratel a total of $38,500, suspend Dratel for 25 business days, and make the firm it subject to a statutory disqualification.
The NAC agreed with the OHO that Dratel, among other things, willfully violated FINRA rules when he failed to disclose on a timely basis on his Form U4 and Form BD that two liens from the Internal Revenue Service, two state judgments, and an American Express Centurion judgment were pending against him and/or the firm.
