Taglich Brothers, Inc., based in Huntington, NY, agreed to settle FINRA charges that it issued research reports that failed to comply with various provisions of NASD Rule 2711. About the Firm. Taglich, a FINRA member since 1/30/92, is a full service brokerage firm with about 16 registered reps.  It also engages in investment advisory services.  Taglich is authorized to act as a broker/dealer engaging in:  (i) retail corporate equity securities OTC;  (ii) mutual funds;  and,  (iii) put and calls or options writing. The Firm also is authorized to act as: (i) an underwriter or selling group participant (corporate securities other than mutual funds); and,  (ii) a non-exchange member arranging for transactions in listed securities by exchange members.  Taglich is further authorized to trade securities for its own account and engage in private placements of securities. FINRA Findings and Allegations. The firm's alleged violative activities took place during a 3-month period - from 4/1/09 through 6/30/09.  Taglich allegedly issued research reports that failed to comply with various provisions of NASD Rule 2711, that governs the conduct of research analysts and the issuance of research reports by FINRA member firms. In particular, the Firm's alleged conduct and actions violated NASD Conduct Rules 2711(c)(2), 2711(g)(2), 2711(h)(1)(B), 271 l(h)(10), 271 l(i), 3010(b), and 2110. FINRA found that Taglich Brothers allegedly sent draft research reports to subject companies before publication - one contained the analyst’s summary, rating and price target;  another contained projected revenues and other financial projections.  Additional findings, included the following:

• Some reports contained strategy sections that interspersed analysts’ opinions with facts, others contained outlook sections that interspersed analysts’ opinions with facts, and some interspersed analysts’ opinions elsewhere in the report.
• The firm permitted its Research Director to execute a trade in a covered security during a period beginning 30 calendar days before and ending 5 calendar days after publishing a research report concerning the subject company.
• The firm published a research report by its analyst covering the company, which downgraded the firm’s rating of that security.
• Research reports the company issued failed to label certain disclosures as important or required, and to print the disclosures on the first page of the reports in a clearly larger font size.
• Two of those reports failed to state that the firm or its affiliates owned 1% or more of the securities of the subject company.
• The firm failed to implement and enforce WSPs reasonably designed to ensure that the firm and its employees complied with the provisions of NASD Rule 2711.
• The firm failed to implement and enforce its WSPs with respect to trading ahead of research reports insofar as it permitted the transaction.
• Finally, the firm failed to implement and enforce its WSPs with respect to disclosure requirements re: research reports the firm issued insofar as it permitted the conduct.

FINRA Sanctions. Taglich Brothers agreed to pay a $30K fine for its violations. For further details, go to:  [FINRA AWC #2009016317501] and [Reports of Disciplinary Actions for February 2003].