PHOENIX - PlanMember Securities Corporation has agreed to pay an $18,500 fine as well as restitution to its customers to settle Financial Industry Regulatory Authority charges that it violated fair pricing and supervision rules.
The Carpinteria, Calif.-based firm agreed to settle the charges without either admitting or denying FINRA’s findings.
The firm did not respond to a request for a comment on FINRA’s findings.
According to FINRA's examiners, PlanMember charged unreasonable markups in eight customer transactions during a review period of between Oct. 1 2015 and Dec. 31 2015.
The transactions cited occurred between Oct. 14 and Nov. 5, and all of them involved Alaska Industrial Development and Export Authority refunding bonds that had been issued in August 2015.
The eight transactions totaled $535,000 of bonds, according to a chart attached to the disciplinary report, and were subject to markups just above 3.2% resulting in $17,120 of profit for the firm.
Those trades, FINRA said, violated Municipal Securities Rulemaking Board Rules G-30 on prices and commissions as well as the fair dealing rule, G-17. G-30 requires dealers to only conduct trades at prices that are “fair and reasonable.”
FINRA said the prices were "not fair and reasonable, taking into consideration all relevant factors, including the best judgment of the [broker-dealer] as to the fair market value of the securities at the time of the transaction and of any securities exchanged or traded in connection with the transaction, the expense involved in effecting the transaction, the fact that the [broker-dealer] is entitled to a profit, and the total dollar amount of the transaction."
The market is anxiously anticipating the May 14 effective date of amendments to G-30 as well as Rule G-15 on confirmations that will require dealers to disclose their markups and markdowns on customer confirmations in both a dollar figure and as a percentage of the prevailing market price. Firms will have to be able to calculate the prevailing market price, and there is concern many firms might still not be ready for the effective date. The MSRB said earlier this week that new guidance on the amendments will be coming soon.
The firm also violated the MSRB’s Rule G-27 on supervision because its written supervisory procedures (WSP) failed to provide for supervision reasonably designed to comply with the rules, FINRA alleged.
FINRA said that WSPs must at minimum identify an individual responsible for supervision, describe the supervisory steps and reviews to the taken by that person, as well as state how often such reviews will occur and specify how the reviews will be documented. PlanMember’s WSPs did not provide for any of those basic requirements, FINRA examiners said.
In addition to its $18,500 fine and an agreement to be censured, the firm also agreed to pay restitution to its customers in the amount of $5,808.25, plus interest.
PlanMember further agreed that within 30 days of accepting the settlement, one of its principals would submit to FINRA a letter or email representing that the firm had revised its WSPs to address the deficiencies identified by examiners and stating the date that the revised procedures were implemented.
PlanMember has been a FINRA member since 1983, according to the disciplinary report, and had no relevant prior disciplinary history.