On the website of the Financial Industry Regulatory Authority (FINRA), it was announced August 23, 2012, that FINRA fined Rodman & Renshaw LLC $315,000 for supervisory and other violations relating to the interaction between the firm's research and investment banking functions. Rodman's former CCO, William A. Iommi Sr., was fined $15,000, suspended from acting in a principal capacity for 90 days and must requalify as a general securities principal. FINRA also found that the firm's supervisory system was deficient, which resulted in at least two incidents where a research analyst participated in efforts to solicit investment banking business, and another incident where a research analyst attempted to arrange a payment from a public company.
Rodman & Renshaw, the New York-based broker-dealer subsidiary of Direct Markets Holdings Corp., according to FINRA, provides investment banking services, including Private Investments in Public Entities (PIPEs) and registered direct offerings, to public and private companies. It also provides research, sales and trading services to institutional investors and therefore must have supervisory and compliance procedures to monitor potential conflicts of interest between research and investment banking, given concerns that research analysts could be pressured to tailor their coverage to the interests of a firm's current or prospective investment banking clients.
FINRA found that from January 2008 to March 2012, Rodman & Renshaw failed to have an adequate supervisory system to monitor interactions between its investment banking and research functions. Rodman & Renshaw failed to prevent research analysts from soliciting investment banking business.
On FINRA's website, Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, "The deficiencies in Rodman's supervisory system created an environment in which the conflict of interest between research and investment banking was left unmanaged. FINRA will continue to ensure that firms have adequate supervisory systems tailored to the firm's business and we will continue to sanction firms that demonstrate a weak culture of compliance and internal controls."
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