Firm Settles Charges Over Inaccurate Disclosures on Mark-Ups

A firm settled FINRA charges for failing to accurately disclose mark-up and mark-down information on municipal and corporate debt securities transactions.

According to the AWC, the firm provided non-institutional customers with confirmations that either inaccurately disclosed or failed to disclose required mark-up or mark-down information. FINRA found that the firm did not include the trade execution time and references or hyperlinks to relevant EMMA and TRACE webpages on customer confirmations. The firm self-identified these issues in June 2021 and reported them to FINRA.

FINRA further found that the firm did not have any reasonably designed process in place to test the accuracy of the information in its internal systems that triggered mark-up and mark-down disclosures on non-institutional customer confirmations. FINRA said the firm also failed to evaluate whether its internal systems accurately captured offsetting trades with an affiliate, which also led to failures in disclosing or inaccurately disclosing mark-ups and mark-downs. As a result, the firm's supervisory system was not adequately designed to ensure compliance with requirements related to the time of execution and security-specific URL disclosures.

FINRA found that the firm violated MSRB Rules G-27 ("Supervision") and G-15 ("Confirmation, Clearance, Settlement and Other Uniform Practice Requirements with Respect to Transactions with Customers") and FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade"), 3110 ("Supervision") and 2232 ("Customer Confirmations")

To settle the charges, the firm agreed to (i) a censure and (ii) pay a $400,000 fine