The Financial Regulatory Industry Authority fined Wells Fargo Advisors LLC $13,000 and ordered it to pay restitution of almost $8,628 to a municipal customer for violating pricing and fair-dealing rules.
The case involving the St. Louis-based firm was among the monthly disciplinary actions FINRA released this month.
The self-regulator also fined Chicago-based Incapital LLC $11,000 for muni trade reporting violations.
In other unrelated cases, FINRA fined and suspended two brokers, one for executing municipal transactions for a customer on a discretionary basis, without having obtained previous written authorization, and the other for making political contributions through his wife and children.
Wells Fargo and Incapital did not admit or deny the findings, but agreed to the sanctions. Wells Fargo officials declined to comment on the case.
“This was the first such issue incurred by the firm and we agreed to resolve the matter without admitting or denying the underlying allegations,” said Jim Schaberg, a managing director at Incapital.
“Updated reporting and supervisory procedures have been in place for the last five months, with no subsequent issues,” Schaberg added.
According to FINRA, during the fourth quarter of 2006 Wells Fargo executed 10 transactions in which it sold muni securities for its own account to a customer at aggregate prices that were “not fair and reasonable, taking into consideration all relevant factors.”
The factors included the best judgment of the broker about the fair-market value of the munis at the time of the transactions, the dollar amount of the transactions, the expense involved in executing the transactions, and the fact that the broker-dealer is entitled to profits.
A chart provided by FINRA showed the markups ranged from almost 3.1% to 3.4% and that the sales to the customer took place only seconds or minutes after the firm purchased the munis.
The self-regulator found Wells Fargo had violated the Municipal Securities Rulemaking Board’s Rule G-17 on fair dealing and Rule G-30 on prices and commissions.
The authority also fined the firm $45,000 and ordered it to pay roughly $30,000 in restitution to customers for excessive markups or markdowns in corporate bond transactions.
FINRA found Incapital violated muni trade reporting and supervisory rules.
The self-regulator said that from April 1 through June 30, 2010, the firm failed to report 59 trades within 15 minutes of execution as was required under the MSRB’s Rule G-14.
The trades represented 4% of all the trades the firm reported to the MSRB under its Real Time Reporting System during that period.
FINRA said Incapital also violated the MSRB’s Rule G-27 because it did not have adequate written supervisory procedures that ensured it would comply with the trade reporting rules.
Stephen Booher, from Celina, Ohio, a former broker with McDonald Investments Inc., which was acquired by UBS Financial Services, was fined $5,000 and suspended for five business days for executing 45 transactions on a discretionary basis in the account of a muni customer without written authority.
FINRA said the trades violated one of its rules and occurred between Feb. 12 and April 16, 2008. Booher is no longer at UBS.
The self-regulator fined Montford Sater Will, formerly a broker and branch manager at Wachovia Securities LLC, now Wells Fargo Advisors, $10,000 and suspended him for 60 days for contributing $121,000 to 19 state and local political campaigns by writing checks on behalf of his wife and step-children.
But FINRA waived the fine and all but 15 days of the suspension, giving Will credit for sanctions meted out by the securities division of Ohio’s Department of Commerce for violating a state law that prohibits making political contributions through other persons. Will is currently a broker at BrokersXpress LLC, according to FINRA.
A lawyer representing Will said that while he was a broker at Wachovia, he was not a municipal finance professional and the political contributions did not run afoul of the MSRB’s Rule G-37.