The agency brought 1,541 disciplinary actions during the year, up from 1,488 last year, and referred nearly 700 cases of potential fraud to the Securities and Exchange Commission or other law enforcement agencies, FINRA said in a release.
Notable muni-related cases last year included a $4.48 million sanction against five firms — Citigroup Global Markets, Inc., Goldman Sachs & Co., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith, Inc., and Morgan Stanley & Co. — for using bond proceeds to reimburse themselves for lobbying fees they paid to the industry advocacy group, California Public Securities Association.
The firms falsely claimed the fees were underwriting expenses. They violated fair-dealing and supervisory rules of the Municipal Securities Rulemaking Board, FINRA said.
Also in 2012, FINRA ordered Syosset, N.Y.-based David Lerner Associates Inc. to pay $4.3 million in fines and restitution for charging excessive markups on transactions of municipal bonds and collateralized-mortgage obligations between 2005 and 2012.
As part of the settlement, the firm’s head David Lerner was barred from the industry for one year and ordered to pay $250,000 in fines.
Lerner was one of 294 individuals barred from securities markets during the year by FINRA. The agency also barred 30 securities firms and suspended 549 brokers from association with FINRA-regulated firms.
“FINRA fulfilled its role as the first line of defense for investors through a comprehensive and aggressive enforcement program, supported by a realigned and more risk-based examination program,” FINRA chairman and Chief Executive Officer Richard Ketchum said in the release.
FINRA’s “risk-based” program is intended to help the agency focus examination on firms that pose the greatest risk to markets and investors, FINRA associate director of member regulation Cynthia Friedlander told attendees at a municipal bond industry meeting in Chicago in June.
Friedlander told attendees that FINRA had flagged 60 of the highest-risk firms for annual examinations.
