Green Street Advisors Fined $150,000 for Issuing Research Reports Prepared by Unregistered Research Analysts
Washington, D.C. — NASD announced today that it has fined Green Street Advisors, a Los Angeles-based broker-dealer, $150,000 for failing to register its eight research analysts under NASD rules that took effect last year. The rules established a special examination series and registration classification for analysts and followed a series of enforcement actions relating to conflicts of interest involving research analysts.
"NASD's analyst registration requirements are designed to protect investors by ensuring that research analysts are properly qualified and fully understand their regulatory obligations," said Barry Goldsmith, NASD Executive Vice President and Head of Enforcement. "It is particularly disturbing that this firm was aware of the problem, failed to observe the new rules' deadlines, and yet continued to issue reports without properly registering their analysts."
As of March 30, 2004, NASD rules require research analysts to be registered with NASD after passing new research analyst examinations. In an effort to avoid business disruptions, persons who were already functioning as research analysts were granted a one-year grace period for meeting the new registration requirements — provided their firm applied for the new research analyst registration by May 31, 2004, 60 days following the effective date of the new requirement.
NASD found that Green Street failed to apply for the research analyst designation for its analysts by the May 31 deadline. Consequently, the one-year grace period for passing the research analyst qualification examinations was not available to Green Street's analysts. On or about June 18, 2004, after Green Street discovered that it had failed to apply for new registration for its eight analysts, the firm sought an extension from NASD of the filing deadline. That request was denied.
Nevertheless, during the period from June 1, 2004 to November 5, 2004 - the date by which all of Green Street's analysts were properly qualified and registered - Green Street's analysts continued to prepare and publish research reports. NASD found that Green Street issued 123 reports and/or updates of the reports, 104 of which were issued after the firm received notice that NASD had denied its request for a filing deadline extension.
In May, in its first enforcement action arising from the new analyst registration rules, NASD sanctioned SunTrust Capital Markets, Inc. $100,000 for similar rule violations.
In settling this matter, Green Street neither admitted nor denied the charges, but consented to the entry of NASD's findings.
Investors can obtain more information and the disciplinary record of any NASD-registered broker or brokerage firm through NASD's BrokerCheck. NASD makes BrokerCheck available at no charge to the public. In 2004, members of the public used this service to conduct nearly 3.8 million searches for existing brokers or firms and requested more than 190,000 reports in cases where disclosable information existed on a broker or firm. Investors can link directly to the program by going online to http://www.nasdbrokercheck.com/. Investors can also access this service by calling (800) 289-9999.
NASD is the leading private-sector provider of financial regulatory services, dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. NASD touches virtually every aspect of the securities business-from registering and educating all industry participants, to examining securities firms, enforcing both NASD rules and the federal securities laws, and administering the largest dispute resolution forum for investors and registered firms. For more information, please visit our Web site at http://www.nasd.com/.