BROWSE BY TOPIC
Stories of Interest
- White House Now Doesn’t Dispute Details of Trump's Call with Army Widow
- Goldman Sachs’ Lloyd Blankfein Just Threw Some Serious Brexit Shade
- Guggenheim Partners ‘Bank Wrecker’ Could Get $100Mn Exit Package
- Proposed Arbitration Rule Change: For Customers Dealing with an Inactive Firm or Associated Person
- This Family Bet It All on Bitcoin
- Clearinghouses Pass CFTC Liquidity Stress Tests
- President Trump Admits He’s Trying to Kill Obamacare. That’s Illegal.
- Trump Plunges Down List of ‘America’s Richest’
- Is Trump’s “Foreclosure King” in Over His Head?
- FBI Arrests NCAA Basketball Coaches and Adidas Rep in Bribery Probe Involving Recruitment
- Equifax CEO Steps Down Amid Hacking Scandal
- Litigation Costs to Rub Salt in RBS Investor Wounds
- RIAs Poised to Land Wirehouse Recruits - Dan Jamieson
- Citibank and U.K. Affiliate to Pay $550K Penalty for Swap Data Reporting Violations - CFTC
- AIG to Restructure into 3 New Units, Marking CEO's First Big Move
- Accounting Firm Deloitte Says It Suffered Cyberattack (subsc reqd)
- Upcoming FINRA Board Meeting and FINRA360 Update
- Elizabeth Warren Lifts Hold on Trump DOJ Antitrust Nominee
- Bigger Mergers Narrow Indy Reps' Options, Alter IBD Channel - Dan Jamieson
- Dentons to Merge with U.K.'s Murray & Spens
We seek to provide information, insights and direction that may enable the Financial Community to effectively and efficiently operate in a regulatory risk-free environment by curating content from all over the web.
Stay Informed with the latest fanancialish news.
NEWSLETTERS & ALERTS
Bond Trader Caught Gaming Institutional Customers
by Howard Haykin
Kenneth Zegar agreed to pay a $30K fine and serve a 2-month suspension to settle FINRA charges that he misrepresented, or suggested that others misrepresent, to institutional customers who were looking to purchase bond that his firm was working on acquiring those bonds when, in fact, the firm already owned the bonds in inventory. In settling, Zegar also agreed to re-take the Series 7 (General Securities Rep) Exam upon re-association with a member firm.
BACKGROUND. Zegar, a resident of New York, NY, has been in the securities industry for 20 years, during which time he’s been associated with 5 firms. From 2008 to present, Zegar was with Jefferies LLC (“JEFF”), serving as Managing Director and trader on the mortgage-backed securities desk. He had no prior disciplinary history.
FINRA FINDINGS. The Fixed Income Investigations unit of FINRA Market Regulation conducted a review of Zegar's communications with customers and JEFF employees over a 3-year period – 2009 through 2011 - to determine if Zegar made misrepresentations to customers in connection with the purchase, offer or sale of fixed income securities. FINRA found 4 instances where misrepresentations were made.
In 3 of the instances, Zegar made a misrepresentation to a customer:
- Twice misrepresented a price at which JEFF had acquired bonds. After learning that JEFF had purchased bonds in a bid-wanted-in-competition on behalf of an institutional customer at the customer's bid price, Zegar told the customer that its bid price was not high enough. As a result, the customer ended up paying for the bonds at prices that exceeded its original bid price – and higher than the price at which JEFF actually bought the bonds. [NOTE: In a “Bid Wanted In Competition” (BWIC), an institutional investor submits its bond bid list to various securities dealers. Dealers then make bids on the listed securities, and those dealers with the highest bids are then contacted.]
- Once misrepresented that JEFF was working on acquiring bonds. Zegar misrepresented to a customer who was looking to buy bonds that JEFF was working with a seller of bonds when, in fact, JEFF already owned the bonds. Zegar held the bonds in his inventory account at JEFF but responded to a bid from a potential purchaser by stating, "I have already shown seller 65 and he has passed."
In a 4th instance, Zegar suggested to a fellow Managing Director that he or she misrepresent to a potential bond buyer that JEFF was working the order of a seller for the bonds in question - even though Zegar knew that it already owned the bonds in inventory.
Zegar' s conduct in all 4 instances constituted separate and distinct violations of FINRA Rule 2010.
This case was reported in FINRA Disciplinary Actions for July 2017.
For details on this case, go to ... FINRA Disciplinary Actions Online, and refer to Case #2016049963001.