The Financial Industry Regulatory Authority ordered four firms and one individual to pay a total of $187,296 in fines and restitution to investors for violations of municipal market rules.
The sanctions were disclosed in FINRA’s monthly report of disciplinary actions, released last week.
The firms agreed to pay the fines without admitting or denying FINRA’s findings.
FINRA said BOSC Inc. in Tulsa, Okla., agreed to pay a $75,000 fine and more than $25,000 in restitution to investors for selling municipal securities at prices that were not “fair and reasonable,” a violation of the Municipal Securities Rulemaking Board’s Rule G-17 on fair dealing and G-30 on prices and commissions.
The violations occurred on 35 trades executed by BOSC in February and March 2008.
BOSC did not return a call for comment.
M.L. Stern & Co., now owned by SWS Group in Dallas, also bought or sold municipal securities at prices that were not “fair and reasonable,” according to FINRA.
The firm, which did not return a call for comment, agreed to pay a $38,000 fine and roughly $20,000 in restitution to investors for the violations, which occurred in 17 transactions during July and August 2008.
FINRA fined KeyBanc Capital Markets Inc. $22,000 for a host of muni-market violations, including filing late official statements with the MSRB.
FINRA said that between 2009 and 2010, Cleveland-based KeyBanc violated the board’s Rule G-32 on primary offering disclosures, which requires underwriters to file official statements to the MSRB’s online Electronic Municipal Market Access system within one business day of receipt, but no later than the closing date.
In July and August 2009, KeyBanc filed one official statement one day late and two statements two days late, according to FINRA.
The report from FINRA also said that on two occasions in March and April 2010, KeyBanc failed to disclose on a timely basis that official statements for primary offerings of muni bonds had not been prepared.
In addition, FINRA said KeyBanc failed to disclose correct yield information on some 10,000 municipal securities trade confirmations between June 2008 and February 2011.
FINRA said the faulty reporting — which occurred because of defects in a new back-office system — violated the MSRB’s Rule G-15 on confirmation, clearance and settlement, and Rule G-27 on supervision.
KeyBanc issued a statement saying that it hd paid the fine and reiterated that it “neither admitted nor denied the allegations.”
In addition, FINRA fined Jenkintown, Pa.-based J. Alden Associates Inc. $2,500 for failing to develop and enforce “reasonably designed” supervisory procedures for reviewing electronic correspondence, a violation of the MSRB’s Rule G-27 on supervision.
The self-regulator also fined Alden and its chief executive, Peter A. Engelbach, $5,000 for similar violations of Rule G-27, as well as violations of MSRB Rule G-41 on anti-money-laundering compliance programs.
The FINRA report said the firm failed to implement a “customer identification program” designed to verify the identity of new customers.
Engelbach called the FINRA fines “unusually high,” noting that his firm’s customers were not affected. He did not comment further.
