Frazer Lanier Company, a limited securities broker-dealer based in Montgomery, AL, and a FINRA member since 1976, agreed to settle FINRA charges that it violated the gifts and gratuities, fair dealing, and supervisory rules of the MSRB.  It did so by allegedly advancing T&E expenses for a family member of an issuer official and family members of a Frazer Lanier principal.  The firm had not been the subject of any prior formal disciplinary action. Frazer Lanier later received reimbursement for these expenses from the proceeds of the bond offerings made by the issuer.  Frazer Lanier also failed to have procedures to monitor the reimbursement process or written supervisory procedures providing guidance on ratings trip reimbursements. FINRA's Findings and Allegations of Wrongdoing. In 2008 and 2009, an Alabama municipality (the "Issuer") sought to issue municipal bonds and retained Frazer Lanier to act as the underwriter.  In connection with the issuer’s efforts to obtain favorable credit ratings for its bond offerings, the municipality’s mayor and a Firm Principal made trips to meet with analysts from the credit rating agencies.  Both individuals took relatives on these trips although none were involved in meetings relating to the municipal bond credit ratings.  The firm advanced payment for some of the relatives’ expenses - a total of $3,838.17.  The firm has since repaid the municipality.

• Advancing payment of the expenses for the client's relative, and then being reimbursed from proceeds of the municipal issues, was tantamount to making gifts and gratuities to the issuer official that exceeded the limits of MSRB Rule G-20 - which are $100 per year per person.
• The firm, having picked up the expenses of the Firm Principal’s relatives - which were not legitimate business expenses - and then submitting these expenses to the client, and receiving reimbursement from the proceeds of the bond issues, constituted deceptive, dishonest and unfair practices under MSRB Rule G-17.
• Of course, these actions meant that the firm failed to  adequately supervise the conduct of its municipal securities business and the municipal securities activities of its associated persons.
• These actions also meant that the firm failed to adequately review the expense reimbursements to determine whether they complied with the firm’s obligations under MSRB Rules G-17 and G-20.

Frazier Lanier was fined $20,000. For further details, go to:   [FINRA AWC #2010021263901, 6/17/11] and [Disciplinary Actions for August 2011].