The Financial Industry Regulatory Authority fined five firms a total of $113,000 for municipal and other trade-reporting violations. Seattle-Northwest Securities Corp. received the largest fine for muni bond rule violations: $13,000 for failing to timely report certain information from 200 municipal transactions.
In monthly disciplinary actions released Tuesday, the self-regulator also announced that it fined Dallas-based WFG Investments Inc. $37,500, Los Angeles-based Crowell, Weedon & Co. $32,500, Florham Park, N.J.-based Seaboard Securities Inc. $20,000, and Dallas-based First Southwest Co. $10,000. Except for First Southwest, the bulk of the fines were for corporate trade violations.
FINRA also announced that it suspended Kathryn Lorraine Ellis from associating with any of its members between Jan. 19 and Oct. 18 for falsely signing documents provided to FINRA with co-workers' names without their permission. She is employed by Cleveland-based SBK-Brooks Investment Corp.
Officials at the firms either declined to comment or could not be reached.
FINRA found that from Jan. 1 to March 31, 2008, Seattle-Northwest failed to report information from 200 muni purchase and sale transactions within 15 minutes of execution, which generally is required by the Municipal Securities Rulemaking Board's Rule G-14 on reporting.
The late reports represent about 6% of the roughly 3,400 trades reported by the firm during the review period, FINRA said. While $8,000 of the $13,000 fine was for the G-14 rule violations, $5,000 was for supervisory oversights in violation of the MSRB's Rule G-27 on supervision.
In a corrective action statement, Seattle-Northwest's chief compliance officer, Jon Labonite, said the firm had made several costly and labor-intensive improvements to its systems and had fixed coding problems with its back-office software that had caused most of the late trade reporting.
FINRA found that WFG failed to timely report information regarding 143 muni transactions between April 1 and June 30, 2008, covering 4% of the transactions.
The self regulator also cited the firm for municipal supervisory failures, though it said that only $10,000 of the $37,500 fine was tied to muni-related rule violations.
Meanwhile, FINRA said that Crowell Weedon reported 702 muni transactions to the MSRB with a "null or numeric value in the Contraparty Correspondent ID field" during the first two quarters of 2007.
The reports represented about 31% of the 2,266 inter-dealer trade reports submitted by the firm during that period, FINRA said, adding that only $5,000 of the firm's $32,500 fine is for muni violations.
FINRA found that Seaboard failed to accurately report 94 of 100 muni transactions that it reviewed and that were executed during August and September of 2007 and January 2008. The firm also failed to report the correct capacity code on 34 of the 100 transactions. The conduct violated Rule G-8 on books and records and G-14. Though FINRA provides no breakdown of the $20,000 fine it imposed on Seaboard Securities, it also cites the firm for several corporate trade violations.
FINRA found that in July and October 2007, as well as April 2008, First Southwest failed to include an accurate reference to seconds in its transaction reports to the MSRB, in violation of G-14. FINRA also cited the firm for supervisory failures.
Specifically, the firm reported 97 transactions without an accurate reference to seconds in the execution time. In addition, for 16 of these muni transactions, the firm's reported execution times to the MSRB were not consistent with the execution times on the transaction's order tickets, FINRA said.
In a statement, Robert Coulter, First Southwest's director of compliance, said the firm has taken steps to address the muni reporting problems.