Targeted Examination Request

June 2009

 

Re: Retail Municipal Securities Transactions

 

FINRA is reviewing retail municipal securities transactions. In connection with this review, we request your firm to produce the following information relevant to retail customer municipal transactions by your firm for the period from January 1, 2009 through March 31, 2009. For the purposes of this request, the term “retail municipal transaction” means a transaction of less than 100 municipal bonds (i.e., less than $100,000 in par value) effected with a customer, including institutional customers.

 

  1. For each identified retail municipal transaction during the review period, please provide a listing or report including the following information:

    1. Customer account number;
    2. Date of the transaction;
    3. Dollar amount of bonds sold to, or bought from, the customer;
    4. Price, inclusive of any mark up/down at which the firm sold/bought from the customer; and
    5. An indication as to whether the transaction was executed As Agent or As Principal.

  2. For the review period, your firm’s written supervisory procedures, memoranda and other documents explaining firm controls in place with regard to the following:

    1. Firm processes for the identification and disclosure of material facts to customers as defined in MSRB Rule G-17 and related interpretations;
    2. Firm processes for disclosures when selling municipal bonds to retail customers during “new issue disclosure periods” as defined in MSRB Rule G-32; and
    3. Firm processes for the identification of issuer material events, as defined in SEC Rule 15c2-12, and the use of this information.

  3. For the review period, your firm’s written supervisory procedures, memoranda and other documents explaining firm controls in place with regard to its responsibilities as a Participating Underwriter under SEC Rule 15c2-12(b), if applicable.

  4. A detailed written description regarding the process for determining pricing for municipal securities when purchasing from or selling to retail customers.

  5. A detailed written description regarding the process for valuing municipal securities after initial sales (i.e., for use on customer statements).

  6. Copies of all advertisements as defined in MSRB Rule G-21, used during the review period, including information appearing on your firm’s Web site, related to municipal securities. Please also include a numbered, tabular list of each advertisement that contains the following information:

    1. The title of the advertisement;
    2. Its internal reference number, if applicable;
    3. The date(s) the advertisement was used;
    4. The names of the publications in which the advertisement appeared or the number of times the advertisement was used; and
    5. The name of the principal who approved the advertisement and the date of approval.

  7. A listing or report for the review period of all customer complaints relating to municipal securities including the following information:

    1. Customer account number;
    2. A summary of the complaint; and
    3. A summary of how the complaint was resolved.

  8. Any other information you believe is pertinent to our understanding of your firm’s retail municipal securities transactions.