The Financial Industry Regulatory Authority fined three firms a total of $92,500, mostly for municipal bond rule violations, and barred a former principal of a firm from the market for falsifying investment statements for a widow to make it look like she owned muni bonds when she did not.
The actions were disclosed in the authority’s monthly disciplinary actions released Thursday.
Butler Muni LLC, based in San Ramon, Calif., was fined $70,000 for failing to inform selling brokers of higher bids for their bonds. Wolfe & Hurst Bond Brokers Inc., based in Jersey City, N.J., was fined $12,500 after an employee falsified trade data to make it look like the firm had complied with the deadlines for reporting muni trades. FMSbonds Inc. in Boca Raton, Fla., was fined $10,000 for corporate and muni rule violations, including incorrectly telling investors that it was serving as their agent instead of as a principal for itself in muni trades.
The individual barred from the market was Jordan P. Zaro, who was president, chief financial officer, and chief compliance officer at Riverside Securities Inc. in Chicago, which he bought in April 1991.
The sanctions against Butler Muni, which was acting as a brokers’ broker and executing trades between broker-dealers, stem from FINRA’s review of the firm from Jan. 1, 2003, through March 31, 2005. FINRA found that in 12 instances during that period Butler did not inform selling broker-dealers of higher bids for their bonds. “As a result, the firm failed to deal fairly with its customers” in violation of the Municipal Securities Rulemaking Board’s Rule G-17 and failed to have adequate supervisory systems in place in violation of Rule G-27, FINRA said.
Wolfe & Hurst’s lack of appropriate supervisory procedures allowed an employee of that firm to modify the reporting times of 67 trades to make them appear to have been reported within the required 15 minutes of execution, FINRA said. As a result, the firm violated MSRB Rule’s G-14 on trading and G-27.
FINRA found that from July 15, 2008, through Oct. 14, 2008, FMSbonds falsely stated in confirmations to investors for 421 muni bond purchases or sales that the firm was acting as an agent rather than as a principal, violating the MSRB’s Rule G-15 on confirmations, FINRA said.
Zaro violated several FINRA and MSRB rules by falsifying investment statements for a 63-year-old widow to make it appear she owned muni bonds and that the value of her portfolio had risen. The statements concealed losses that occurred from Zaro’s churning, or excessing trading, of the securities in her account.
Firm officials and Zaro either declined to comment or could not be reached for comment.