Targeted Examination Request

June 2009

 

Re: Retail Sale of “Gas Bonds”

 

FINRA is reviewing transactions with retail customers of certain fixed income products known as “Gas Bonds.” In connection with this review, we request your firm respond to the following request for information relevant to certain Gas Bonds sold by your firm during the period January 1, 2008 through December 31, 2008.

 

  1. Provide a listing of all transactions with retail customers during the review period, including the following information:

    1. Customer account number
    2. Date of the transaction with the customer
    3. Dollar amount of bonds sold to or bought from the customer
    4. An indication whether the transaction was a sale to or purchase from the customer
    5. Price, inclusive of any mark up/down at which the bond(s) were sold to the customer
    6. Total investment in the Gas Bond in dollar amount by the customer

  2. For the review period, your firm’s written supervisory procedures, memos or other documents explaining firm controls in place with regards 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 periods” as defined in MSRB Rule G-32
    3. Firm processes for the identification of issuer material events, as defined in SEC Rule 15c2-12, and the use of this information

  3. A detailed written description regarding the process for determining pricing for Gas Bonds when selling/buying Gas Bonds to/from retail customers.

  4. A detailed written description regarding the process that existed during the review period for valuing Gas Bonds after initial sales (i.e., for use on customer statements).

  5. A listing of all material events identified by your firm for the issuers of the identified Gas Bonds, including the dates they were identified by your firm.

  6. Copies of all electronic or printed advertising and sales literature used during the review period, including information appearing on your firm’s Web site, related to Gas Bonds.

  7. A listing of all retail customer complaints regarding Gas Bonds including the following information;

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

  8. Any other information you believe is pertinent to our understanding of your firm’s Gas Bond transactions with retail customers.