Among recent enforcement actions by the Financial Industry Regulatory Authority were the censure and fine of a firm for failures relating to private placements; of another for failures relating to monitoring execution times related to TRACE; and of another for failure to disclose reportable unsatisfied liens and judgments of registered representatives.
FINRA Fines, Censures Firm on Lien, Judgment Reporting Failures
RBC Capital Markets LLC was censured by FINRA and fined $300,000 on findings that it failed to amend, or to amend in a timely manner, Forms U4 for registered representatives to report unsatisfied tax liens and civil judgments.
According to the agency, the firm received wage garnishment orders from courts and tax authorities, including the Internal Revenue Service, resulting from tax levies, civil judgments and similar actions, for registered representatives. However, it failed to consistently conduct a sufficient inquiry to determine if the underlying event triggering each garnishment order involved an event that should have been reported on the affected individual’s Form U4.
Its supervisory system also failed, according to FINRA, to ensure that it disclosed reportable unsatisfied liens and judgments of registered representatives on Forms U4, when a garnishment notice was sent to the firm, or to make sure its payroll department notified compliance or supervisory personnel to determine if the garnishment involved a reportable event, or that compliance or supervisory personnel acted appropriately to consider garnishments and disclose reportable events as necessary.
The firm neither admitted nor denied the findings but consented to the sanctions.
FINRA Censures, Fines Florida Firm $100,000 on Private Placements
Clearwater, Florida-based Halen Capital Management Inc. was censured by FINRA and fined $100,000 on findings that the firm distributed a private placement memorandum (PPM) for the company that did not comply with FINRA rules governing member firm communications with the public.
According to the agency, the firm distributed confusing and misleading offering documents for unregistered common stock offered by a company.
Those documents, said FINRA, created a substantial risk that investors could be confused or misled; they were not fair and balanced and did not provide a sound basis for evaluating the facts relevant to the company’s securities being offered.
In addition, FINRA found that the firm participated in the sale of unregistered and nonexempt securities in contravention of Section 5. It participated in sales of the company’s stock to nonaccredited investors, not all of whom were sophisticated and who were not provided with all required written financial disclosures.
The firm also failed to file the company’s offering documents with FINRA before providing them to prospective investors after the company acquired and became a controlling entity of the firm. It maintained inadequate supervisory systems relating to its participation in private placements and communications with the public, and it failed to have its CEO make annual FINRA-required supervisory certifications.
Without admitting or denying the findings, the firm consented to the sanctions, and was also required to provide a written notice to each affected investor of the investor’s right to surrender the shares obtained in a company’s private offering in return for a refund of the original investment, and to retain an independent consultant to review its policies, systems and procedures regarding private placements, advertising, annual CEO certifications, member private offerings and Section 5 of the Securities Act of 1933. Firm Censured, Fined on TRACE Execution Time Reporting Failures
FINRA has censured New York-based Jefferies LLC and fined the firm $235,000 after it found that, for settlement dates Jan. 15, 2010, through Oct. 14, 2011, the firm reported 112 short interest positions in dually listed foreign securities totaling 8,944,854 shares, when it should have reported 112 short interest positions totaling 55,007,028 shares; and for settlement dates Jan. 15, 2010, through Oct. 14, 2011, the firm failed to report 1,382 short interest positions in dually listed foreign securities totaling 179,838,025 shares.
According to the agency, the firm failed to report in FINRA’s Trade Reporting and Compliance Engine the correct contraparty’s identifier for S1 transactions in TRACE-eligible agency debt securities. As a joint lead manager or sole manager, the firm failed to report new issue offerings in TRACE-eligible agency debt securities to FINRA according to required time frames.
It also, said FINRA, reported to TRACE S1 transactions in corporate debt securities with an inaccurate trade execution time; failed to report in a timely manner S1 transactions in TRACE-eligible corporate debt securities; and failed to report the correct execution time on the firm’s order memoranda for the S1 transactions, among other reporting failures. And for the settlement dates of March 14, 2014, through Aug. 29, 2014, the firm reported 3,439 short interest positions totaling 104,234,568 shares, when it should have reported 2,158 short interest positions totaling 28,441,522 shares.
Without admitting or denying the findings, the firm consented to the sanctions, which include a requirement to revise its supervisory procedures to monitor execution times reported to TRACE.
— Check out Sen. Warren Blasts SEC Disclosure Initiative as Harmful to Investors on ThinkAdvisor.