FINRA fines four firms, one person for muni securities violations
PHOENIX – Four firms and an individual agreed to pay a combined $157,500 to settle Financial Industry Regulatory Authority charges that they violated municipal securities rules, including trading below the minimum denominations, registration failures, and supervisory failures that resulted in disclosure violations.
Ameriprise Financial Services, Cabrera Capital Markets, R. Seelaus & Co., Performance Trust Capital Partners, and Murray Sinclaire of Ross Sinclaire & Associates all signed agreements with FINRA to put to rest charges that they violated Municipal Securities Rulemaking Board rules. The agreements date from mid-September until early October, and all the parties agreed to the settlements without admitting ir denying FINRA’s findings.
Minneapolis-based Ameriprise agreed to pay $45,000 in connection with charges that it traded municipal securities in amounts below the minimum denomination set for the bonds 23 times from Dec. 1, 2013 through Dec. 31, 2014. FINRA also found that the firm was not aware that the official statements for two of the securities it recommended involving eight of those transactions limited the sale and resale of the bonds to Qualified Institutional Buyers, and sold them to investors who were not QIBs. Examiners further found that the firm failed to disclose the sales restrictions to its customers, and that its supervisory system was insufficient to ensure compliance with MSRB rules.
That conduct represented violations of MSRB Rules G-17 on fair dealing, G-15 on confirmation, clearance, and settlement, G-19 on suitability, G-47 on time of trade disclosure, and G-27 on supervision, FINRA said.
Chicago-based Cabrera said it would pay $22,500 to settle charges that it failed to maintain adequate records of its due diligence, didn’t have sufficient supervisory systems in place, and failed to register as a municipal advisor on time. FINRA examiners found that the firm failed to maintain records that it did due diligence to ensure accurate offering documents in when it underwrote five muni deals from August 2012 until October 2013. The deals ranged in size from approximately $8 million to approximately $150 million.
That conduct violated G-27, FINRA said.
FINRA also alleged that between February and May of 2014, Cabrera acted as a municipal advisor for four different municipalities but was not properly registered with either the MSRB or the Securities and Exchange Commission during that time period as required by federal law and MSRB rules. Due to a clerical error, Cabrera also failed to file individual registration forms for three individuals before they conducted municipal advisory activities between July of 2014 and October of 2014, FINRA found.
After later filing forms for two of those individuals, Cabrera failed to timely update the forms when those representatives left the firm and then hired a municipal advisory principal in June 2015 but failed to file a registration form for him until that October. As a result of all these failures, the firm violated MSRB Rules A-12 and G-44 on supervisory and compliance obligations of municipal advisors, FINRA said.
Summit, N.J. – based Seelaus agreed to a fine of $35,000 to settle charges it failed to report information regarding 468 transactions to the Real-time Transaction Reporting System (RTRS) in two review periods from July 1, 2015 through March 31, 2016 and July 1, 2016 through Dec. 31, 2016. MSRB Rule G-14 requires that transactions be reported within 15 minutes, and the firm failed to do so, FINRA alleged. FINRA also found fault with the firm’s supervision system, violating G-27.
Performance Trust Capital Partners, based in Chicago, also got dinged for G-14 violations when it failed to timely report 213 transactions in the last two quarters of 2015 and the first quarter of 2016, FINRA said. The firm agreed to pay $20,000 to settle those charges.
Murray Sinclaire, founder of Cincinnati-based Ross, Sinclaire & Associates, agreed to pay a fine of $35,000, serve a 6-month suspension from associating with any FINRA registered firm in any principal capacity, and requalify as a municipal securities principal by passing the Series 53 exam to settle charges that he failed to ensure that RSA personnel disclosed all material facts in documents used to sell an offering in which RSA was the sole underwriter. Sinclaire was responsible for compliance, but the private placement memorandum for a $2 million private placement in April 2016 related to a racetrack deal failed to disclose material information, including the dire financial condition of a party to the deal, which Sinclaire also owned, FINRA said. His conduct violated G-17 and G-27, FINRA found.
A representative for Sinclaire explained the violations in a statement to the Bond Buyer.
“In 1993 the late Terrell Ross -- Sinclaire’s co-founder in their financial firm – organized a company, Appalachian Racing, LLC, put together a group of investors, and subleased from Floyd County, Kentucky Public Properties Corporation a portion of the financed facilities to operate Thunder Ridge Harness Race Track in Prestonsburg, Kentucky. A bond financing transaction was initiated by Terrell Ross and Floyd County, Kentucky Public Properties Corporation. The proceeds of this bond financing were to be used for the acquisition, construction, and equipping of fairgrounds, convention center, and related parking facilities.”
“After Ross’ death in 2006,” the statement continued “Sinclaire became Managing Partner of Appalachian Racing, LLC. After Ross’ death Sinclaire was now obligated to handle the financial and operational issues of the racetrack. Despite certain financial struggles, since the bonds were issued in 1993 and refinanced six times (1999, 2004, 2007, 2011, 2015 and 2016), the racetrack has made required lease payments. In addition, Mr. Sinclaire worked to finalize a transaction between Floyd County and Appalachian Racing pursuant to which all April 2016 bondholders were paid in full and the bonds were extinguished. At no time during the issuance of the bonds did any bondholders incur a loss related to the bonds.”
The other firms fined either did not respond to a request for comment, or declined to comment.