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Regulatory Sanctions

To Err is Human, To Give is Still a Violation

September 25, 2017

[Photo: 2017 Florida State v. University of Florida, by Melina Vastola / USA TODAY Sports]


by Howard Haykin


It’s been over a year since FINRA published Regulatory Notice 16-29, expressing its intention to increase the gift limit from $100 to $175. It should not come as a surprise that FINRA Rule 3220 remains unchanged, and still limits gifts to $100 per person per year. MSRB’s Rule G-20 applies those same limits to municipal advisors.


Benchmark Securities recently agreed to a $25K fine to settle FINRA charges that it violated MSRB rules for having issued multiple gifts in excess of $100.


BACKGROUND.    Benchmark, based in Winter Park, FL, has been a FINRA member since August 2012, and it’s also a member of the MSRB. The firm employs 15 registered reps, has 3 branch offices and is approved to conduct business in corporate debt, corporate equities, mortgage/asset backed securities, municipal debt/bonds, private placements, proprietary trading and underwriting. The firm has no relevant prior disciplinary history.


FINRA FINDINGS.    From February 2013 through September 2014 (the "Relevant Time Period"), while acting as the lead underwriter for negotiated municipal deals, Benchmark provided gifts, usually in the form of college football tickets, to approximately 16 municipal issuer representatives that were valued in excess of the $100 limit. In the instances of football tickets, no one from Benchmark attended the event with the municipal issuer representatives.


While Benchmark’s WSP’s noted that the CCO or his designee would "check" to ensure that single gifts or gifts in the aggregate did not violate the $100/rolling calendar year provision of MSRB Rule G-20, supervision was never implemented – notwithstanding the fact that the WSP's didn’t specify how supervision would be performed.


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 #2016047564601.