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NEWSLETTERS & ALERTS
FINRA Sweeps Nab Firms for Best Execution Violations
By Howard Haykin
Pursuant to separate and distinct reviews by the Fixed Income Investigations Team of FINRA’s Department of Market Regulation, two broker-dealers were charges with failing to provide best execution in corporate bond transactions for or with customers.
- A Spokane, WA-based B/D agreed to pay $48K in fines and restitution, and to revise its WSPs, to settle the charges.
- A Bolton, MA-based B/D agreed to pay $37K in fines and restitution, and to revise its WSPs, to settle similar FINRA charges.
FINRA FINDINGS - CASE ONE (AWC #2015045624401). During the review period, which ran from January 2015 through March 2016, the firm relied solely upon 2 broker-dealers to source the bonds for filling customer's corporate bond orders. In certain instances, the resulting pricing to the firm's customers did not comply with the best execution or fair pricing requirements of FINRA Rules 5310 and 2121, respectively.
- In 6 corporate bond transactions for or with a customer from January through March 2015, the firm failed to use reasonable diligence to ascertain the best inter-dealer market and failed to buy or sell in such market so that the resultant price to its customer was as favorable as possible under prevailing market conditions. [violations of FINRA Rule 5310, Best Execution and Interpositioning]
- In 25 transactions from October 2015 through March 2016, the firm sold corporate bonds to customers and failed to sell such bonds at a price that was fair, taking into consideration all relevant circumstances, including market conditions with respect to each bond at the time of the transaction, the expense involved and that the firm was entitled to a profit. [violations of FINRA Rule 2121, Fair Prices and Commissions]
FINRA FINDINGS - CASE TWO (AWC #2016049481101). In 7 transactions during the review period, October 2015 through December 2015, the firm sold corporate bonds to customers and failed to sell such bonds at a price that was fair, taking into consideration all relevant circumstances, including market conditions with respect to each bond at the time of the transaction, the expense involved, and that the firm was entitled to a profit. [violations of FINRA Rule 2121, Fair Prices and Commissions]
These cases were reported in FINRA Disciplinary Actions for May 2018.
For details on either case, go to ... FINRA Disciplinary Actions Online, and refer to the respective AWC Number.