WASHINGTON - The Financial Industry Regulatory Authority has ordered five firms to pay $137,500 in fines for violations of trade reporting and other municipal securities rules.
The firms agreed to pay the fines without admitting or denying wrongdoing, according to FINRA's monthly disciplinary report, released earlier this week.
FINRA said brokersXpress LLC, a former Chicago-based unit of Charles Schwab & Co., agreed to pay $60,000 for violations related to 257 municipal bond trades the firm executed between July 2008 and June 2010.
FINRA said the trades were executed on a "riskless principal or agency basis," and that brokersXpress was required by the Municipal Securities Rulemaking Board's Rule G-14 on trade reporting to submit a total of 514 reports for the trades - 257 of the firm's trades with dealers and 257 of the trades with its customers.
The firm failed to submit reports of any trades with dealers, and submitted only 213 reports for trades with customers, FINRA said. Many of those reports were filed late and had inaccurate prices, yields, trade times and dates.
Reports for another 37 trades were submitted to the MSRB, but incorrectly said the trades were conducted by a brokersXpress affiliate, according to FINRA. The firm also incorrectly reported four corporate bond trades to the MSRB.
In addition, FINRA said brokersXpress failed to keep accurate trade confirmations for 121 of the 257 trades, a violation of MSRB Rule G-8 on books and records, and had insufficient supervisory procedures, a violation of Rule G-27 on supervision.
In 2007, brokersXpress paid $50,000 in penalties for failing to make timely and accurate reports of muni trades and for poor supervisory procedures, as well as for violations of rules of the SEC and FINRA's predecessor, NASD.
In a separate matter, San Francisco-based Charles Schwab, which announced earlier this year that it was shuttering its brokersXpress unit, was also fined for muni-related violations by FINRA.
In the first quarter of 2010, Schwab failed to report 19 trades - 24% of block trades it executed during the period - to the MSRB's Real-Time Transaction Reporting System within 15 minutes, a violation of Rule G-14, according to FINRA. Another 10 trades - 20% of its block trades during the period - were filed late in the fourth quarter of that year.
The firm also did not report the correct yield in 206 trade reports submitted to RTRS in the second quarter of 2010.
Schwab, which agreed to pay $35,000 for the violations, was fined a total of $65,000 by FINRA for G-14 violations in 2007 and 2009.
A spokesperson declined to comment about the brokersXpress or Schwab violations.
Univest Investments Inc., based in Souderton, Pa., agreed to pay $17,500 in fines for muni-related violations.
FINRA said that between January 2007 and January 2011, the firm's supervisory procedures did not adequately ensure compliance with regulations related to electronic correspondence, branch office registration, delivery of officials statements and other activities, resulting in violations of Rule G-27.
In addition, a Series-53 licensed municipal principal did not review 22 muni transactions executed by the firm from 2008 to 2010, a violation of Rule G-2 on professional standards and G-3 on classification of principals and representatives, said FINRA
Cincinnati-based Fifth Third Securities Inc., agreed to pay $15,000 for violations of rules G-14 and G-27.
FINRA said that in 25 instances the firm reported "step out" transactions as "purchase and sale" transactions. In addition, the firm's supervisory procedures were not reasonably designed to achieve compliance. A Fifth Third spokesperson said the firm does not comment about regulatory matters.
FINRA fined Birmingham-based Sterne, Agee & Leach Inc., $10,000 for violating of rule G-37 on political contributions. The firm failed to report 11 instances in which it participated in negotiated municipal securities underwriting between April 2009 and September 2011. It also did not disclose political action committee contributions during the first quarter of 2010, FINRA said. Sterne, Agee and Leach could not be reached for comment.
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