FINRA Panel Expels CMG From Market, Fines Sterne Agee

A Financial Industry Regulatory Authority hearing panel has ordered that CMG Institutional Trading LLC in Chicago and its top official, Shawn Baldwin, be expelled from the financial markets for a number of serious municipal and securities rule violations.

CMG and Baldwin can appeal the ruling - which was issued in October but not made public until late last week - to FINRA's National Adjudicatory Council. They could not be reached for comment.

In a separate matter, FINRA fined Birmingham, Ala.-based Sterne, Agee & Leach $18,000 for municipal securities trade violations.

The two enforcement cases were disclosed in the authority's monthly disciplinary actions that were issued late last week.

FINRA's enforcement division found that CMG participated in municipal bond deals in 2004 and 2005 without having a qualified muni securities principal at the firm, in violation of the Municipal Securities Rulemaking Board's Rule G-3 on principals and representatives. In one deal, Chicago's O'Hare International Airport issued third-lien revenue funding bonds in November 2004, and in the other, Detroit issued taxable certificates of participation on May 25, 2005.

The firm also failed to establish, maintain, or enforce adequate written supervisory procedures for complying with MSRB rules violating Rule G-27 on supervision, according to FINRA.

In addition, the authority said CMG failed to identify a principal for electronic mail contact with the MSRB in violation of Rule G-40 on e-mail contacts, failed to provide the board with a list of issuers with which it had engaged in business in violation of Rule G-37, and failed to implement an anti-money laundering program under G-41.

The firm's non-muni rule violations included engaging in securities-related activities without employing a qualified financial and operations principal and failing to maintain the required amount of net capital.

Baldwin registered with FINRA as a general securities representative in September 2000 and later became a general securities principal. He was president, chief executive officer, chief compliance officer, and owner of more than 75% of CMG, which was registered as a broker-dealer in December 2001.

The complaint in this case stemmed from a FINRA examination of the books and records of CMG on June 21, 2005, and a review of a previous exam of the firm that had been conducted in March 2003.

FINRA's enforcement department filed the 14-count complaint against CMG and Baldwin on Aug. 30, 2007. A hearing was held in the case in July 2008. The department had recommended that the firm be suspended from the markets for seven months and fined $170,000 along with Baldwin. The department said Baldwin should be barred from the markets from serving as a principal and suspended for two years and six months from serving in any other capacity.

The hearing panel decided that tougher sanctions were warranted, saying "the violations were numerous and egregious."

FINRA's fine of $18,000 against Sterne Agee for municipal rule violations was part of a larger fine of $53,000 for non-muni as well as rule violations.

In the municipal area, FINRA found that from July 1, 2006, through Sept. 30, 2006, the firm failed report 136, or 5.9%, of all of its muni trades in a timely manner, violating MSRB Rule G-14. The board's real-time transaction reporting system requires dealers to report information from most trades to the board within 15 minutes of execution.

FINRA also found that the firm failed to include certain required trade data for 18 transactions during the same time period and improperly reported another five transactions.

In addition, the self-regulatory agency found that from April 1, 2007, through June 30, 2007, Sterne Agee failed to report 158 muni trades in a timely manner.

FINRA also fined the firm for corporate trade data and other non-muni rule violations.

Officials at Sterne Agee could not be reached for comment.

 

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