The Financial Industry Regulatory Authority has censured and fined White Plains, N.Y.-based Belle Haven Investments LP $32,500 for failing to timely report municipal securities transactions and for failing to enforce written supervisory procedures, FINRA said yesterday.
The fine was announced in monthly disciplinary actions that also revealed the self-regulator had censured and fined New York City-based Cantor Fitzgerald & Co. $140,000 for several municipal and corporate securities rules violations. However, FINRA officials could not immediately say how much of that fine was attributable to the alleged muni violations.
While both firms agreed to pay their respective fines, they neither admitted nor denied FINRA’s findings.
FINRA found that Belle Haven, between July 1, 2006, and Sept. 30, 2006, failed to timely report information regarding 128 purchase and sale transactions, violating the Municipal Securities Rulemaking Board’s Rule G-14, which generally requires firms to report information about each transaction within 15 minutes through its Real-time Transaction Reporting System.
The late reports represented about 7% of the 1,922 transaction reports that the firm reported to the MSRB during this period, FINRA said.
During the same period, FINRA also found that the firm failed to enforce its written supervisory procedures, violating the Rule G-27.
Separately, the self-regulator found that between April 1, 2007, and June 30, 2007, Belle Haven failed to timely report information regarding 170 purchase and sale transactions, representing about 6% of all muni transactions reported by the firm to the MSRB. FINRA again cited the firm for supervisory failures during this period.
Finally, from Jan. 1, 2008, through March 31, 2008, FINRA found that Belle Haven failed to timely report 226 purchase and sale transactions to the MSRB, representing about 5% of all muni transactions during the period of review.
In a corrective action statement, Belle Haven said it had augmented or improved its documentation, communication, and supervisory procedures to ensure that such violations are prevented in the future. The firm also said it is also now providing more training to its employees for better execution of its compliance tasks.
Matt Dalton, chief executive officer of Belle Haven, said in an interview that it is difficult for small firms like his to comply with trade reporting rules because it is cost prohibitive to operate an automated system. Belle Haven and other similarly sized firms must manually enter trade information, he said.
“Many smaller broker-dealers are at a disadvantage when it comes to electronic or automated systems, which enhance the ability to report trades in a timely manner,” he said.
FINRA said that Cantor Fitzgerald, between Dec. 10, 2005, and Sept. 21, 2007, failed to disclose the required yield information on customer confirmations for 192, or 11%, of 1,741 municipal bond transactions, violating the MSRB’s Rule G-15 on confirmations.
FINRA also found that during roughly the same time period, a sample of 38 municipal securities transactions showed the firm failed to record the time of receipt on the securities’ order memoranda, in violation of the MSRB’s Rule G-8 on books and records.
Robert Hubbell, a spokesman for Cantor, declined to comment.