A Financial Industry Regulatory Authority (FINRA) hearing panel ruled on Wednesday that Long Island-based David Lerner Associates charged excessive markups on municipal bond and collateralized mortgage obligation (CMO) transactions over a two-year period, causing the firm’s retail customers to pay unfairly high prices and receive lower yields than they otherwise would have received.
The panel fined Lerner $2.3 million for the markup and related supervisory violations, and ordered the firm to pay restitution of more than $1.4 million, plus interest, to affected customers. The panel also fined its head trader, William Mason, $200,000 and suspended him for six months from the securities industry. The ruling resolves charges brought by FINRA’s Department of Enforcement in May 2010.
The panel found that from January 2005 through January 2007, Lerner and Mason charged retail customers excessive markups in more than 1,500 municipal bond transactions and charged excessive markups in more than 1,700 CMO transactions from January 2005 through August 2007.