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FINRA Sweep Nabs B/D for Unfair Pricing on Muni Bond Trades with Customers
by Howard Haykin
R. Seelaus & Co. agreed to pay more than $42K in fines, restitution and interest to settle FINRA charges that it purchased and sold municipal securities for its own account from/to customers at aggregate prices that were neither fair nor reasonable.
BACKGROUND. R. Seelaus, a Summit, NJ-based FINRA member firm since 1984, was initially a muni bond dealer conducting business with the major trust banks of New York and Chicago. Since then, the firm has grown into a full-service financial firm, with more than 60 financial advisors, traders, and analysts. According to FINRA, R. Seelaus has no prior relevant disciplinary history.
FINRA FINDINGS. FINRA conducted a Muni Bond Fair Pricing review for the period, 4/1/15 through 12/3/15 (“the review period”). Examiners found 28 pairs of transactions in which the firm purchased municipal securities for its own account from a customer and/or sold municipal securities for its own account to a customer at an aggregate price (including any mark-down or mark-up) that was not fair and reasonable.
In evaluating prices, FINRA took into consideration all relevant factors, including:
- the best judgment of the broker, dealer or municipal securities dealer as to the fair market value (FMV) of the securities at the time of the transaction and of any securities exchanged or traded in connection with the transaction;
- the expense involved in effecting the transaction;
- the fact that the broker, dealer, or municipal securities dealer is entitled to a profit; and,
- the total dollar amount of the transaction.
This case was reported in FINRA Disciplinary Actions for August 2017.
For details on this case, go to ... FINRA Disciplinary Actions Online, and refer to Case #2015046947201.