FINRA Fines Rodman & Renshaw $315,000 for Supervisory and Information Barrier Violations; Former Chief Compliance Officer and Two Research Analysts Sanctioned
WASHINGTON — The Financial Industry Regulatory Authority (FINRA) announced today that it has fined Rodman & Renshaw LLC $315,000 for supervisory and other violations related to the interaction between the firm's research and investment banking functions. Rodman's former CCO, William A. Iommi Sr., was fined $15,000, suspended from acting in a principal capacity for 90 days and must requalify as a general securities principal. FINRA found the firm's supervisory system was deficient, which resulted in at least two incidents where a research analyst participated in efforts to solicit investment banking business, and another incident where a research analyst attempted to arrange a payment from a public company. FINRA sanctioned the two research analysts involved; Lewis B. Fan was fined $10,000 and suspended for 30 business days for violating NASD Rule 2711 by participating in efforts to solicit investment banking business from two public companies, and Alka Singh was fined $10,000 and suspended for six months after FINRA found that she attempted to arrange a concealed fee from a public company for which she provided research coverage.
Rodman, the New York-based broker-dealer subsidiary of Direct Markets Holdings Corp., provides investment banking services, including Private Investments in Public Entities (PIPEs) and registered direct offerings, to public and private companies. It also provides research, sales and trading services to institutional investors and therefore must have supervisory and compliance procedures to monitor potential conflicts of interest between research and investment banking, given concerns that research analysts could be pressured to tailor their coverage to the interests of a firm's current or prospective investment banking clients.
FINRA found that from January 2008 to March 2012, Rodman failed to have an adequate supervisory system to monitor interactions between its investment banking and research functions. As a result, Rodman failed to prevent research analysts from soliciting investment banking business. In addition, the firm compensated a research analyst for his contribution to the firm's investment banking business and failed to prevent Rodman's CEO, a member of the firm's Research Analyst Compensation Committee while simultaneously engaged in investment banking activities, from having influence or control over research analysts' evaluations or compensation.
Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, "The deficiencies in Rodman's supervisory system created an environment in which the conflict of interest between research and investment banking was left unmanaged. FINRA will continue to ensure that firms have adequate supervisory systems tailored to the firm's business and we will continue to sanction firms that demonstrate a weak culture of compliance and internal controls."
In concluding this settlement, Rodman, Iommi, Fan and Singh neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
FINRA's investigation was conducted by the Departments of Enforcement, Market Regulation and Member Regulation, and the Office of Fraud Detection and Market Intelligence.
Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA's BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2011, members of the public used this service to conduct 14.2 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999. Investors may find copies of this disciplinary action as well as other disciplinary documents in FINRA's Disciplinary Actions Online database.
FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, informing and educating the investing public, providing trade reporting and other industry utilities, and administering the largest dispute resolution forum for investors and firms. For more information, please visit www.finra.org.