NASD Fines 20 Firms $1.65 Million for Municipal Trade Reporting Violations
Washington, D.C. — NASD announced today that it has censured and fined 20 securities firms a total of $1.65 million for late and/or inaccurate reporting of tens of thousands of municipal securities transactions to the Municipal Securities Rulemaking Board (MSRB). NASD is responsible for enforcing MSRB rules.
Prior to Jan. 31, 2005, MSRB rules required all dealers to report municipal trades to the MSRB by midnight of the day of the trade, for public dissemination the following day. As of January 31, MSRB rules require that those transactions be reported within 15 minutes of trade execution. The MSRB now disseminates trade data about all reported municipal securities transactions almost immediately after the trades are reported.
The enforcement actions announced today focus on misconduct that occurred from January 2003 through October 2004. During that period, 19 of the 20 firms failed to timely report at least five percent of their customer trades in municipal securities. Additionally, from January 2003 through May 2004, seven firms failed to timely report at least 12 percent of their inter-dealer municipal securities trades. NASD found that each firm failed to monitor its trade reporting to ensure compliance with MSRB reporting rules.
The majority of individual fines announced today are the most severe NASD has ever imposed for municipal securities trade reporting violations, underscoring the fact that prompt, accurate transaction reporting is critical to the functioning of the municipal securities market. Prompt, accurate reporting also provides the primary audit trail for regulators to conduct surveillance for potentially manipulative practices and to detect sales practice violations and other violations of the federal securities laws and MSRB rules. NASD and the MSRB have repeatedly advised dealers of their responsibility to report transactions accurately and timely.
“Accurate and timely trade reporting ensures that dealers and investors alike obtain an accurate picture of market activity and prices – facilitating a dealer’s ability to price municipal securities accurately and an investor’s ability to make informed investment decisions,” said Mary Schapiro, NASD Vice Chairman. “Municipal dealers, retail and institutional investors and other market participants rely upon the integrity of trade data published by MSRB when making investment and trading decisions.”
Prior to the actions announced today, the largest fine ever imposed by NASD for municipal trade reporting violations was $25,000. In today’s actions, NASD censured and fined the following firms:
|Piper Jaffray & Co.||$280,000||Minneapolis, MN|
|ABN AMRO Incorporated||$220,000||Chicago, IL|
|J.P. Morgan Securities, Inc.||$160,000||New York, NY|
|Goldman, Sachs & Co.||$140,000||New York, NY|
|Stephens, Inc.||$110,000||Little Rock, AR|
|Stone & Youngberg, LLC||$110,000||San Francisco, CA|
|Banc of America
Investment Services, Inc.
|Raymond James & Associates, Inc.||$90,000||St. Petersburg, FL|
|Brinker Capital Securities, Inc.||$60,000||King of Prussia, PA|
|Chase Investment Services Corp.||$60,000||Chicago, IL|
|Citigroup Global Markets Inc.||$60,000||New York, NY|
|CIBC World Markets Corp.||$40,000||New York, NY|
|Emmet & Co., Inc.||$40,000||Far Hills, NJ|
|Loop Capital Markets, LLC||$40,000||Chicago, IL|
|Popular Securities, Inc.||$40,000||Hato Rey, PR|
|BOSC, Inc.||$30,000||Tulsa, OK|
|Pershing LLC||$30,000||Jersey City, NJ|
|Prager, Sealy & Co., LLC||$30,000||San Francisco, CA|
|Tejas Securities Group, Inc.||$10,000||Austin, TX|
|UBS International Inc.||$10,000||New York, NY|
In settling with NASD, the firms neither admitted nor denied the allegations, but consented to the entry of NASD’s findings. NASD is continuing its investigation of apparent municipal trade reporting deficiencies at other firms.
NASD recently launched Smart Bond Investing, an online learning center that provides a wealth of information about bonds and bond investing, along with easy access to real-time corporate and municipal bond prices and the day's most active corporate bonds. In addition to covering the basics of bond maturity, yield and pricing, Smart Bond Investing offers sections on dealing with risk; how bonds are bought and sold; an overview of the corporate, municipal and government bond markets, and a look at the various types of individual bonds and bond mutual funds.
Special features of Smart Bond Investing include a Risk Report Card and Snapshot for corporate, municipal, government and additional types of bonds, an interactive Accrued Interest Calculator and helpful tips and resources that include a Bond and Bond Fund Comparison table and a Top 10 List of things to consider before investing in bonds or bond funds.
In February 2005, NASD launched full implementation of its Trade Reporting and Compliance Engine (TRACE), which makes data on virtually all corporate bond transactions publicly available within 30 minutes. Beginning July 1, that data will be publicly available within 15 minutes. TRACE data is available free of charge at www.nasdbondinfo.com.
Investors can obtain more information about, and the disciplinary record of, any NASD-registered broker or brokerage firm by using NASD's BrokerCheck. NASD makes BrokerCheck available at no charge to the public. In 2004, members of the public used this service to conduct more than 3.8 million searches and request almost 190,000 reports for existing brokers or firms. Investors can link directly to BrokerCheck at www.nasdbrokercheck.com. Investors can also access this service by calling 1-800-289-9999.
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 member firms. For more information, please visit our website at www.nasd.com.