FINRA fines BB&T Securities $47,500 for muni violations
A subsidiary of Truist Financial Corporation has agreed to pay $47,500 to settle charges it violated municipal securities rules after the Financial Industry Regulatory Authority found it failed to accurately submit variable rate demand obligation interest rate information.
BB&T Securities agreed to pay the fine and be censured while neither admitting nor denying FINRA’s finding that it violated Municipal Securities Rulemaking Board Rules G-34 on CUSIP requirements and G-27 on supervision. The firm will be paying $30,000 for violating MSRB Rule G-34 and $17,500 for violating Rule MSRB Rule G-27.
From March 18, 2009 through March 29, 2018, BB&T failed to submit accurate minimum denomination and maximum interest rates to the MSRB’s Short-Term Obligation Rate Transparency (SHORT) System in 3,710 instances, FINRA found. The SHORT system collects and disseminates information and documents on municipal securities bearing interest at short-term rates, including VRDOs.
Remarketing agents did not report the minimum denomination in 2,002 submissions to the MSRB’s SHORT system, a 2.94% error rate, or the maximum interest rate in 1,708 submissions, a 3.35% error rate, FINRA said.
MSRB Rule G-34 requires each remarketing agent to submit VRDO interest rate reset information, including the minimum denomination and maximum interest rate. The minimum denomination of a muni bond is the lowest denomination of an issue that can be purchased or authorized by the bond documents. The maximum interest rate is the highest permissible rate for a muni security set by governing documents, like the official statement.
Those missing minimum denominations affected seven CUSIPs and the missing maximum interest rate affected six of those CUSIPs.
“The reporting failures occurred because the firm’s reporting system, which transmits data to the MSRB’s Electronic Municipal Market Access (“EMMA”) System for SHORT reporting, did not require the entry of the minimum denomination and maximum interest rate fields,” FINRA said. “BB&T traders mistakenly left the minimum denomination and maximum interest rate fields blank.”
The firm also failed to establish and maintain a supervisory system, FINRA found.
During the relevant period, BB&T did not maintain a supervisory system, including written supervisory procedures to ensure compliance with MSRB Rule G-34.
“The firm’s written supervisory procedures related to SHORT System reporting were merely operational in that they described the steps to be taken when submitting information to the SHORT System,” FINRA said. “The firm lacked a supervisory system, including written supervisory procedures, to review if the required information was submitted to the SHORT System and to confirm the accuracy of the submitted information, including the minimum denomination and maximum interest rate fields.”
The firm has updated its supervisory procedures, FINRA said.
"We’re pleased the matter is resolved, but will decline to comment further," a Truist spokesperson said.
BB&T and SunTrust completed their megamerger to become Truist Financial late last year.