The National Association of Securities Dealers censured and imposed a fine of $79,750 on Fifth Third Securities Inc. for failing to file official statements for muni bond offerings on a timely basis with the Municipal Securities Rulemaking Board and for filing late forms with the NASD regarding the termination of employees registrations.
The NASD also suspended Elizabeth S. Brasler, a broker with Cantella & Co. in Ojai, Calif., for two months from the securities industry and ordered her to pay a fine of $5,000, and restitution of up to $112,018 to customer for selling that customer unsuitably risky municipal bonds. The bonds were not identified or described other than as high risk.
Both enforcement actions were part of settlements detailed in the NASDs monthly disciplinary actions that were released Wednesday. Neither Fifth Third nor Brasler admitted nor denied the charges and neither could be reached for comment.
Fifth Third, a registered broker-dealer since 1939 that is based in Cincinnati, failed to file timely official statements with the MSRB for at least 28 muni offerings between July 1, 2001 and April 1, 2003, according to the NASD.
The late filings violated Rule G-36, which requires underwriters of primary offerings to send the board official statements for primary municipal transactions within one business day after receiving the documents from the issuer and no later than 10 business days after the final agreement to purchase, offer or sell the bonds.
The firm missed the 10-day deadline for all 28 of the offerings, the NASD said. In addition, for 19 of the offerings, it failed to meet the one-day deadline after receiving the official statements from the issuer, according to the NASD.
As a result, Fifth Third violated G-36. It also violated the MSRBs Rule G-27 on supervision, the NASD said, because after repeated late submissions by its associated persons, Fifth Third failed to ensure that all MSRB Forms G-36 were timely submitted to the MSRB.
The firm also failed to follow its written supervisory procedures, the NASD said.
In addition, from February 2002 until July 2003, Fifth Third failed to file timely U-2 forms for 152 or 20% of
734 employees or associated persons whose registrations were terminated, the NASD said.
NASD by-laws require dealer employees who withdraw their registrations to file U-5 forms with the NASD within 30 calendar days. If the dealer learns of facts or circumstances causing any information on a form to be inaccurate or incomplete, it must amend the form within 30 days.
Fifth Thirds late filings violated the NASD by-laws and Conduct Rule 2110, the NASD said. In addition, the firm violated Conduct Rule 3010 because it failed to ensure timely filings after repeated late submissions by approximately 17 managers of [its] Offices of Supervisory Jurisdiction, the NASD said.
The enforcement action was the fourth the NASD or Securities and Exchange Commission has taken against Fifth Third in recent years, according to the NASD. The association fined the firm $15,000 in February 2002 for failing to meet continuing education requirements. It fined the firm $20,000 in November 2003 for failing to file accurate trade data for municipal securities transactions in violation of MSRB Rules G-14 and G-27.
Also in June 2002, the SEC ordered Fifth Third to pay a $1 million civil penalty after the broker-dealer underwrote 24 municipal securities transactions in violation of the MSRBs Rule G-37. The underwritings were in violation of several two-year bans on business with issuers. The bans were triggered after issuer officials who could influence the award of bond business received 14 political contributions from persons at a bank affiliated with the firm.
The NASD took enforcement action against Brasler for violating MSRB rules G-17 on fair dealing and G-19 on suitability of recommendations and transactions by recommending a customer purchase unsuitable high risk municipal bonds.
As a result of her recommendations, the customer invested about $258,718 in the bonds in five transactions that occurred in February, April, and August of 2001.
The recommendations were made without having reasonable grounds for believing that it was suitable for [the customer] in light of the facts disclosed by such customer or otherwise known about such customer concerning her financial status, investment objectives and risk tolerance, the NASD said.
NASD enforcement documents did not identify the customer or the bonds.
