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Regulatory Sanctions

WWW: Broker-Dealer Gets Dinged for Avoidable Sales Errors

April 11, 2017

[Photo: DullHunk (Duncan Hull) / Flickr]


Carelessness can play a role in rule violations, as in this case when muni bonds are sold to ineligible customers, or when muni bonds are sold in amounts below the minimum denomination.


The GMS Group of Livingston, NJ, agreed to a $45K fine to settle FINRA charges that it committed various violations in its sales of municipal bonds to retail customers.


ABOUT THE RESPONDENT.    GMS. a FINRA member since 1979, has approximately 95 registered reps. FINRA notes that, back in 2011, the firm had failed to deliver Official Statements to customers who purchased muni bonds – for which it paid a $50K fine.


FINRA’S SPECIFIC FINDINGS.    In 23 transactions between January 2014 and March 2015, GMS sold muni bonds to retail customers in amounts below the minimum denomination. On 3 occasions, GMS failed to disclose to customers that their purchase was in an amount below the minimum denomination.


The firm also sold 4 bonds in approximately 200 transactions to customers who were not Qualified lnstitutional Buyers ("QlBs '), even though the Official Statements for these bonds stated that they were  eligible for sale only to QIBs.


This case was reported in FINRA Disciplinary Actions for February 2017.

For details on this case, go to … FINRA Disciplinary Actions Online, and refer to Case #2015043159601.