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TAG | Municipal securities

Apr/12

24

Banc of America Investment Services, Inc., Sanctioned by FINRA

Comments off · Posted by Securities Lawyer in FINRA

The following information is from FINRA’s website under “Disciplinary Actions, April, 2012:”
 

Banc of America Investment Services, Inc. dba Merrill Lynch, Pierce, Fenner & Smith Incorporated (CRD #7691, New York, New York) 

submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $55,000. The firm has already paid restitution to the customers involved with the transactions. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it purchased municipal securities for its own account from a customer and/or sold municipal securities for its own account to a customer at an aggregate price (including any markdown or markup) that was not fair and reasonable, taking into consideration all relevant factors, including the best judgment of the broker, dealer or municipal securities dealer as to the fair market value of the securities at the time of the transaction and of any other securities exchanged or traded in connection with the transaction, the expense involved in effecting the transaction, the fact that the broker, dealer or municipal securities dealer is entitled to a profit, and the total dollar amount of the transaction.

( FINRA Case #2009018104101)

The information from FINRA’s website has ended.
 
Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide.
For a free consultation with an attorney, please call 888-760-6552, or visit our website at: www.securitieslawyer.com. 

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Mar/12

14

Finra’s Top Enforcement Actions

Comments off · Posted by Securities Lawyer in FINRA

In an article from InvestmentNews.com, we learn that enforcement actions and fines by the Financial Industry Regulatory Authority Inc., or Finra,  jumped sharply in 2011, with the latter rising to $68 million, from $45 million in 2010, a new study shows. Much of that surge came from penalties for improper advertising.
Finra filed 1,488 disciplinary actions in 2011, up from 1,310 cases in 2010, according to the annual Finra sanctions survey released on Monday. The number of brokers barred by Finra rose to 329 in 2011, from 288 in 2010. Here are eight top areas of enforcement, ranked by total fines.

1. Advertising

Finra Fines: $21.Million
Details: Sanctions involving advertising jumped from $4.75 million in 2010 to $21.1 million in 2011. The number of cases doubled in number to 45 in 2011. As in 2009 and 2010, a significant amount of the 2011 advertising fines ($9.5 million) related to the sale of ARS. In addition, nearly $8 million in fines stemmed from nine cases involving the use of allegedly misleading advertising materials on firm websites available to investors. This included advertisements for complex products and more traditional investments like annuities.

2. Short selling

Finra Fines: $16.8 million
Details: Short-selling cases generated $16.8 million in fines in 2011. In contrast, short selling was fifth on Sutherland’s list last year. The $16,8 million was a more than fourfold increase compared with the fines reported in 2010. This large increase was largely driven by a single $12 million fine imposed on a firm that allegedly violated Regulation SHO by failing to properly supervise millions of short sale orders that were mismarked and placed to the market without reasonable grounds to believe that the securities could be borrowed.

3. Auction rate securities

Finra Fines: $10 million
Details: ARS continued to be an important focus for Finra in 2011, as seven ARS cases resulted in nearly $10 million in fines. This was a substantial increase from 2010 when two ARS cases were reported that resulted in $1.75 million in total fines. Most of the 2011 cases concerned the alleged failure to disclose material facts to investors, often in advertising materials

4. Suitability

Finra Fines: $7.7 million
Details: Such cases led to $7.7 million in reported fines in 2011. The 106 cases that involved suitability in 2011 doubled the cases reported in 2009 and 2010. Similarly, the fines reported in suitability cases jumped from $3.75 million in 2010 to $7.7 million in 2011. Suitability has repeatedly landed on Sutherland’s list, placing fourth in 2010 and 2011 and second in 2008 and 2009.

5. Improper forms

Finra Fines: $6.6 million
Details:U4, U5, and Rule 3070 filings resulted in 91 Finra disciplinary actions and more than $6.6 million in reported fines in 2011 (compared to 67 cases and fines of $1.45 million in 2010). Although allegations concerning isolated problems with these regulatory filings often led to fines of $5,000 to $10,000, there were four 2011 cases where each firm was fined more than $600,000 for failing to report material information on Forms U4 and U5, including SEC investigations and customer settlements.

6. Mutual funds

Finra Fines: $5.1 million
Details: After yielding the most fines in both 2008 and 2009, fines involving mutual funds dropped dramatically in 2010. There were only 12 such cases in 2010, and only $1.3 million in fines. In comparison, mutual fund cases generated more than $104 million and $95 million in fines in 2005 and 2006. Although the $5.1 million in 2011 fines is only a fraction of these earlier numbers, it is a big increase from 2010’s figures. The number of mutual fund cases (55) and total amount of fines more than quadrupled during the past year compared to 2010.

7. Municipal securities

Finra Fines: $3.7 million
Details: In Finra’s Feb. 8, 2011 Regulatory and Examination Priorities Letter, it emphasized that member firms need to understand the municipal securities they sell and corresponding regulatory requirements. The SRO’s Jan. 31, 2012 edition of this letter reminded firms that they must ensure that any muni bonds sold are suitable for customers. Finra’s 2011 enforcement reflected a growing concern about munis, as the number of cases reported jumped 81% in 2011. The amount of fines reported in 2011 ($3.7 million) more than doubled the $1.5 million imposed in 2010.

8. Electronic communications

Finra Fines: $3.6 million
Details:The total amount of fines stemming from alleged violations concerning electronic communications has now decreased for three consecutive years. After yielding about $4 million in fines in both 2009 and 2010, these cases resulted in only $3.6 million in fines in 2011. Still, the number of cases actually grew from 34 reported in 2010 to 57 in 2011.

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you or a family member have sustained investment losses due to your stock broker or financial advisor’s recommendations, call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website at: www.securitieslawyer.com.
 
Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.

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Feb/12

7

FINRA Cracking Down on Risky REITs, VAs, Private Placements and on B-Ds’ Fees

Comments off · Posted by Securities Lawyer in FINRA

In an article for InvestmentNews.com, on February 1st, 2012, Mark Schoeff Jr. writes that in a market defined by low interest rates, investors are searching for higher returns. But brokers better be careful how they try to deliver those results, according to their primary regulator.

In a 16 page letter posted on its website, the Financial Industry Regulatory Authority Inc., (FINRA)  outlined its regulatory and examination priorities for 2012. At the top of the list: conduct and products meant to beat the market that instead are unsuitable for investors.

“FINRA is informing its examination priorities against the economic environment that investors have faced since 2008, as these circumstances have steadily contributed to conditions that foster an increased risk of aggressive yield chasing, inappropriate sales practices, unsuitable product offerings, and misappropriation and fraud,” the letter states.

“Given the low yields on Treasuries, we are concerned that investors may be inadvertently taking risks that they do not understand or that are inadequately disclosed as they chase yields,” the letter continues. Lack of liquidity and inadequate cash flow in investments also are red flags Finra is monitoring.

Shoeff writes that among the products that are on FINRA’s watch list for suitability problems: residential- and commercial-mortgage-backed securities, nontraded real estate investment trusts, municipal securities, exchange-traded funds using synthetic derivatives and significant leverage, variable annuities, structured products, private placements and life settlements.

FINRA said that it is undertaking a “broader data collection effort” and targeting its enforcement efforts on high-risk firms.  FINRA warned brokers not to enhance their balance sheets by taking on excessive debt or manipulating their assets and liabilities.

“FINRA is concerned about the additional risks that are being taken as a result of increased leverage, including market, credit and liquidity risk,” the letter states. “We will continue to monitor firms that employ a high degree of leverage, both on-balance-sheet and off-balance-sheet during the upcoming year.”

The InvestmentNews.com article goes on to say that FINRA also is zeroing in on fees.

“We remain concerned about firms’ charging retail investors hidden, mislabeled or excessive fees,” the letter states. “In 2011, FINRA brought cases against several broker-dealers that charged such excessive fees in the form of postage and handling charges that were unrelated to actual costs, and we will continue to investigate firms that appear to be taking advantage of investors through fee schemes.”

FINRA’s guidance on social media is less explicit. It said that it “is a topic on which we continue to receive many questions from firms.” FINRA reiterated that “core regulatory requirements apply to all communications with the public, irrespective of the medium or device used to communicate. Firms must be able to appropriately supervise business communications made using personal devices.”

Schoeff writes that high-frequency trading, and oversight of the creation and redemption of exchange-traded funds, also are listed among the agency’s many priorities. FINRA oversees about 4,460 broker-dealers and enforces the suitability standard, which requires brokers to sell products that fit their clients’ investment needs, timelines and risk appetites.

Other regulators are paying attention to FINRA’s priorities as   well.

“States look at these very highly,” said Steve Thomas, director of Lexington Compliance, a division of RIA in a Box LLC, and former South Dakota chief compliance examiner. “They make individual decisions on whether these items should be added to their state’s examinations.”

Securities Attorney, Lars Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you or a family member have sustained investment losses due to your stock broker or financial advisor’s recommendations, call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website at: www.securitieslawyer.com.
 
Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.

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