FINRA fines New York firm $100,000 for muni violations
First Manhattan Co. has agreed to pay $100,000 to settle charges it violated multiple municipal securities rules after the Financial Industry Regulatory Authority found it failed on various occasions to purchase municipal securities for its customers at a fair and reasonable price.
The firm agreed this week to pay the fine and be censured while neither admitting or denying FINRA’s findings that it violated Municipal Securities Rulemaking Board Rules G-30 on prices and commissions and G-27 on supervision.
In seven transactions in July and August 2015, the firm bought municipal securities from an unaffiliated dealer without making “a reasonable effort to obtain prices that were fair and reasonable in relation to prevailing market conditions,” FINRA found.
That dealer was First Manhattan's counterparty for nearly all of its municipal securities transactions and First Manhattan did not consider prices being offered by other broker-dealers, resulting in transactions being executed at “prices away from the market,” FINRA said.
From July 2015 to May 2016, the firm did not say how a designated principal should monitor compliance with MSRB Rule G-30’s requirement to make a reasonable effort to get a fair and reasonable price for customers, FINRA said.
“Furthermore, although a registered principal periodically reviewed summary, aggregate pricing data to determine whether First Manhattan's pricing across all of its municipal securities transactions was comparable on average to market prices, the review was not reasonably designed to achieve compliance with MSRB Rule G-30(b)(i) because aggregated data can obscure information about individual transactions,” FINRA said.
MSRB Rule G-30(b)(i) specifically says "similar" muni securities should be sufficiently similar to the subject security as a reasonable alternative investment to the investor.
In May 2016, the firm implemented new written supervisory procedures that required a comparison of the pricing of each municipal securities transaction against one or more independent sources.
First Manhattan Co. has been a FINRA member firm since January 1955. The firm has one branch in New York City with 80 registered representatives.
The firm does not have any relevant disciplinary history with the Securities and Exchange Commission, any state securities regulatory or self-regulatory organization.
The firm’s attorney and the firm did not respond to comment.