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Southwest’s violations included using paid consultants to sell municipal securities and breaking other Municipal Securities Rulemaking Board rules.
From October 2006 through April 2009, according to FINRA, Southwest paid more than $200,000 to five individuals to sell municipal securities. Through the consultants’ services, Southwest received 24 municipal securities underwritings and two roles as financial advisor to Texas municipalities, according to FINRA. Southwest also paid three other individuals more than $26,000 in one-time payments for municipal securities sales.
Southwest’s payments to its consultants and others for the sale of municipal securities “contravened the MSRB’s prohibition against such activity, and threatened to compromise the integrity of the municipal securities market,” said FINRA Executive Vice President and Chief of Enforcement Brad Bennett.
Southwest violated MSRB rules by failing to file MSRB forms for more than 300 municipal securities transactions, including the G-36(OS) and G-36(ARD), on time, FINRA said. During the October 2006 to April 2009 time frame, Southwest also failed to adequately supervise its municipal securities business according to certain MSRB rules, including the regulation of political contributions. That led to a violation of MSRB Rule G-37, which resulted in regulatory action by the Securities and Exchange Commission against the firm last March.
Southwest’s settlement with FINRA will require an officer at the firm to review and confirm to FINRA that its systems and procedures are in compliance with MSRB rules. In the settlement, Southwest neither confirmed nor denied the charges brought against the firm. Southwest did consent to FINRA’s findings entry.
Lori Konish writes for On Wall Street
