Broker pays fees for non-disclosures and defective account statements

A broker has settled FINRA charges for (i) failing to disclose that certain corporate and municipal bonds held by its clients were in default and (ii) failing to provide a number of required disclosures to its clients.

In an acceptance, waiver and consent letter, FINRA said the broker-dealer distributed account statements to some clients showing that some of the bonds held were making payments when they were in fact in default. FINRA determined that the broker had been notified of the breaches, but the account statements did not reflect this information. By failing to keep accurate records for these obligations, FINRA found that the broker-dealer violated FINRA Rule 4511 (“Books and Records Requirements – General Requirements”) and MSRB Rule G-8 (“Books and Records to be Maintained by Brokers, Dealers, and Municipal Dealers in Securities and Municipal Councilors”).

FINRA found that the company failed to provide certain (i) privacy disclosures in violation of the SP (“Confidentiality of Consumer Financial Information and Protection of Personal Information”) Rules, (ii) enforcement notices of order in violation of SEC NMS Rule 242.606 (“Disclosure of Order Routing Information”), and (iii) margin information in violation of FINRA Rule 2264 (“Disclosure of Margin Information FINRA found that the firm had inadequate supervisory systems, violating FINRA Rule 3110 (“Supervision”) and MSRB Rule G-27 (“Supervision”).

To settle the charges, the broker agreed to (i) a censure, (ii) a civil monetary penalty of $850,000 ($300,000 regarding violations of the MSRB rules) and (iii) undertake improvements to its notification processes and of disclosure.

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