The Financial Industry Regulatory Authority has ordered six firms to pay a total of $234,924 in fines and restitution for violations of municipal securities rules, the self-regulator announced Monday.
In addition, Success Trade Securities Inc., based in Washington, D.C., and Fuad Ahmed, its president and chief executive officer, were fined a total of $110,000 for municipal and other rule violations, according to FINRA’s monthly report of disciplinary actions.
The firms agreed to pay the fines without admitting or denying the findings.
The sanctions include a $55,000 fine against New York-based broker-dealer Banc of America Investment Services Inc., which violated the Municipal Securities Rulemaking Board’s rules G-17 on fair dealing and G-30 on prices, FINRA said.
The firm, a Bank of America Corp. holding company that is registered with FINRA and does business as Merrill Lynch, Pierce, Fenner & Smith Inc., sold municipal securities at prices that were not fair and reasonable eight times in 2008.
Banc of America already paid $33,576 in restitution to customers affected by the transactions, FINRA said.
FINRA also announced it fined B of A’s Merrill Lynch subsidiary $35,000 for failing to report more than 600 muni transactions to the MSRB’s Real-Time Transaction Reporting System within 15 minutes in 2009, and for failing to report the correct times of trades. The failures constituted violations of MSRB’s Rule G-14 on reports of sales or purchases.
In addition, Merrill Lynch did not report the correct time of execution on the trade memorandums associated with 179 transactions it conducted with other broker-dealers, a violation of Rule G-8 on books and records.
A spokesperson for Bank of America declined to comment on FINRA’s findings.
Dallas-based National Alliance Securities Corp. also violated Rules G-14 and G-8, according to FINRA.
The report said that in 2010, the firm failed to report 42 muni transactions to RTRS within 15 minutes, failed to report correct times of trade on 43 transactions, and did not show the correct execution time on the trade memorandums related to 22 muni transactions.
FINRA also said the firm’s supervisory procedures were inadequate, a violation of Rule G-27 on supervision.
National Alliance agreed to pay a $12,500 fine and to revise its supervisory procedures. The firm did not immediately return a call for comment.
Among other firms to receive fines for pricing violations was Investors Capital Corp., based in Lynnfield, Mass.
It agreed to pay a $10,000 penalty and roughly $4,000 in restitution for selling or buying munis at unfair prices in 12 transactions in 2008. FINRA said the firm violated rules G-17 and G-30. The markups ranged from 3.45% to 6.47%.
Beverly Hills-based StockCross Financial Services Inc. agreed to pay a $50,000 fine and $17,348 in restitution for buying or selling municipal securities at unfair prices on seven transactions in late 2007 and early 2008, according to FINRA. The securities were sold at prices ranging from 97 to 101.125.
A spokesperson for StockCross declined to comment.
BNY Mellon Capital Markets LLC, based in New York City, agreed to pay a $17,500 fine for violations of rules G-27 and G-34, on CUSIPs, new issues and market information requirements.
The firm, which declined to comment, improperly reported variable-rate demand obligation information to the MSRB’s Short-Term Obligation Rate Transparency system, and missed reporting deadlines, according to the report. The violations occurred more than 2,100 times.
In addition, FINRA said BNY Mellon lacked sufficient supervisory procedures.
In 2009, BNY Mellon agreed to pay a fine of $250,000, and was required to make buyback offers on certain action-rate securities, for violations of Rules G-17, G-21 and G-27.
FINRA also fined Success Trade Securities and its president and CEO for changing its business model and then engaging in five municipal securities trades without FINRA’s approval. The trades, which FINRA said violated its rules, occurred between April 2009 and May 2010.
The report said the firm also lacked adequate records or customer identification programs, had conducted transactions with questionable customers, and had transferred money to countries that have a high money-laundering risk.
Ahmed also received a 60-day suspension from association with FINRA members and was ordered to complete 16 hours of anti-money-laundering continuing education.
Richard Levan, an attorney who represents the firm, said Success Trade Securities has “made signification changes to its procedures and systems subsequent to the initiation of FINRA’s inquiry.”
“They’ve beefed up their procedures quite significantly,” added Levan, who works at the law firm Wiggin and Dana LLP.