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FINRA Fined 4 Firms Over Sales of New Issue Muni Securities

July 20, 2011
FMSbonds, The GMS Group, Janney Montgomery Scott, and Oppenheimer & Co. each agreed to fines ranging from $50K to $100K to settle FINRA charges relating to sales to customers.  [Note: Janney was recently fined by the SEC for allegedly mishandling confidential information - see C-I WWW story on 7/13/11.] Each firm was cited for failing to deliver official statements to customers.  FINRA notes that the obligation to deliver the such statements is not limited to underwriters of the municipal bond issue, but also to firms not participating in the offering that sell the municipal securities during the primary offering period and to secondary market transactions during that period. FMSbonds, Inc., Boca Raton, FL. In FINRA Case #2009019191401, the firm agreed to pay a $100K fine after FINRA found it had:
  • failed to deliver official statements by the settlement date to numerous customers who purchased new issue municipal securities during the primary offering disclosure period;  in all of these transactions, the firm was neither an underwriter nor part of the underwriting syndicate but was required to deliver an official statement to each customer by the settlement date.
  • failed to keep a record of deliveries of official statements to purchasers of new issue municipal securities, as required by MSRB Rule G-8(a)(xiii).
  • failed to adopt, maintain and enforce adequate WSP's pertaining to the firm’s official statement delivery requirements to customers who purchased new issue municipal securities for secondary market transactions that occurred during the primary offering disclosure period, including those transactions in which the firm was not an underwriter nor part of the underwriting syndicate, in compliance with MSRB Rules G-8 and G-32.
The GMS Group, Livingston, NJ. In FINRA Case #2009017280701, firm agreed to pay $50K.  Same findings as above. Janney Montgomery Scott, Philadelphia, PA. In FINRA Case #2009018503501, firm fined $75K.  In addition to the above findings, FINRA found that Janney had allowed a 3rd-party service provider to deliver official statements to firm customers.  And, the firm’s WSP's specifically required firm operational personnel to conduct periodic reviews of the service provider to ensure that the official statements were timely delivered. However, firm personnel apparently failed to conduct a sufficiently thorough review of the service provider, or an adequate number of reviews and, in certain instances, failed to verify timely delivery of the official statements. Oppenheimer & Co., New York, NY. In FINRA Case #2009018400501, firm fined $100K.  Same findings as with FMSbonds. For further details on these and other cases, go to:   [FINRA Disciplinary Actions for July 2011]

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