The Financial Industry Regulatory Authority censured and fined four firms $59,500 for municipal and other securities rules violations, including $27,500 against Dallas-based WFG Investments Inc., for allegedly buying and selling municipal securities at unfair and unreasonable prices for its accounts.
WFG Investments, and the other firms - Stoever Glass & Co., based in New York City, Piper Jaffray & Co., in Minneapolis, and Great Pacific Fixed Income Securities Inc. in Costa Mesa, Calif. - neither admitted nor denied any wrongdoing.
The self-regulator found that in 16 pairs of transactions between Jan. 1, 2003, and March 31, 2005, WFG bought or sold municipal securities at an aggregate price that was not fair and reasonable, taking into consideration "all relevant factors," including the best judgement of the broker-dealer as to the fair market value of the securities at the time of their transaction and as well as the expense involved in the trades, among other things. In addition to the fine, WFG also agreed to pay $10,029.96, plus interest, in restitution to customers.
During the same period, the firm failed on 21 occasions to show correct terms and conditions on the memoranda for 14 municipal securities transactions, in violation of the Municipal Securities Rulemaking Board's Rule G-8 on books and records. Specifically, it incorrectly provided a buy or sell designation on the memos for 13 of the transactions and failed to include time stamps that showed the correct time of receipt on the memos for six of the transactions. It also failed to include time stamps that showed the time of execution on the memos for two of the transactions.
FINRA found the firm violated the MSRB's rules G-17 on fair dealing and G-30 on prices and commissions by failing to implement an adequate supervisory system. Among other things, WFG failed to enforce its written supervisory procedures that specified that a designated principal would review and approve each order ticket and record the review by initialing the order ticket. FINRA also said that none of the order tickets for the paired transactions reflected any indication of a supervisory review of the order tickets.
Dagny Young, WFG's chief operating officer, could not be reached for comment.
Separately, FINRA finedStoever $12,000 and ordered it to pay $3,482.74, plus interest, for buying or selling municipal securities at an aggregate price that was not fair and reasonable in seven pairs of transactions between Jan 1, 2003, and March 31, 2005. The firm was also cited for supervisory shortcomings that violated the MSRB's rules G-17 and G-30.
An exhibit attached to the firm's letter of acceptance, waiver, and consent shows that the firm marked up six of the seven trades by between 4.16% and 6.81% and marked down one trade 3.98%. Michael Carrigg, a principal at Stoever, declined to comment.
FINRA also fined Piper Jaffray$10,000 for failing timely file 17 of 795 MSRB Rule G-36 forms tied to official statements and advance refunding documents. The rule requires underwriters of primary muni securities offerings to file the forms and final official statements with the MSRB within one business day after receipt of the document from the issuer, and no later than 10 business days after any final agreement to purchase, offer, or sell the securities. A spokesman for the firm could not be reached for comment.
The self-regulator fined Great Pacific$10,000 for failing to report both municipal and corporate transactions accurately or in a timely manner. Between Jan. 1 and March 31, 2007, the firm improperly reported 37 "purchase and sale transactions effected in municipal securities" to the MSRB's Real-Time Transaction Reporting system, "when those events were nonreportable customer allocations of 18 reportable block transactions that the firm failed to report," FINRA said.
During the same period, the firm failed to report information regarding 14 purchases and sale transactions of municipal securities to RTRS by failing to include a "Special Condition Indicator" in its reports. It also failed to timely report 20 purchase and sales transactions to RTRS, including 10 within the required 15-minute period of their execution and 10 transactions required to be reported by the end of the day of their execution. FINRA found the firm violated the board's Rule G-14 on transaction reporting as well as its Rule G-27 on supervision.