The Securities and Exchange Commission is fining Philadelphia broker-dealer Janney Montgomery Scott LLC for “failing to establish and enforce policies and procedures to prevent the misuse of material non-public information, as required by law.”
Janney Montgomery Scott, without either denying the findings or admitting guilt -- a common arrangement in settlement agreements reached with the SEC -- has agreed to be censured by the agency and to pay a fine of $850,000.
The SEC says that the broker-dealer also has agreed to cease and desist from committing or causing any further violations of Section 15(g) of the SEC Act of 1934, which bars the misuse of such insider information.
The SEC, in its order dated July 11, states that from at least January 2005 through July 2009, the firm, which has over 100 offices located primarily along the East Coast, “failed to adequately establish, maintain and enforce policies and procedures reasonably designed, taking into consideration the nature of its business, to prevent the misuse of material, nonpublic information.”
During that period, the SEC asserts that Janney investment banking personnel and analysts, who were supposed to be separated by a “Chinese wall,” met frequently and often out of the presence of compliance counsel to plan business strategy and to use research analysts “to help to solicit trading business.”
In one specific instance cited, a Janney analyst, three days after one such meeting, is said to have recommended a stock of a company being advised by Janney in a pending merger to “at least three institutional clients,” who then “immediately bought the stock of the company.”
As part of its settlement agreement with the SEC, Janney Montgomery Scott has agreed to hire an independent consultant to conduct a review of Janney’s compliance policies and to adopt the policies and procedures recommended by that consultant at the end of a 180-day period.
Asked for comment on the settlement, a Janney spokeswoman offered a written response stating: “The settlement with the SEC relates to matters that initiated in 2005 and concluded in July 2009. The charges of the order are limited to policies and procedures and there were no charges of insider trading."
"Upon being informed of the allegations, the firm reviewed and, as appropriate, strengthened and amended its policies and procedures," the statement continues. "No client accounts were harmed as a result of any of the charged conduct, and the fine is not material to Janney’s financial condition."
"We are pleased to have cooperated with the Commission in its investigation, and look forward to working with the independent consultant who will be reviewing Janney’s pertinent policies and procedures."