Firms Pay Total of $1.4 Million for Stock Loan Improprieties, Supervisory Deficiencies, Trader Suspended and Fined
Washington, D.C. — The Financial Industry Regulatory Authority (FINRA) announced today that as part of its in-depth investigation of stock loan practices in the industry, it has imposed a fine of $1 million against Raymond James & Associates, Inc. of St. Petersburg, FL, and a fine of $400,000 against RBC Capital Markets Corporation of New York, for various stock loan improprieties.
Raymond James was sanctioned for making unjustified and improper payments to finder firms that provided no service in locating securities or had no involvement in the stock loan transaction for which they were paid. Raymond James and RBCCMC were both fined for using a non-registered individual, who had been convicted in federal court of securities law violations and had been barred from the securities industry by the Securities and Exchange Commission (SEC), to perform stock loan functions requiring registration.
Benedict Patrick Tommasino, the head trader of RBCCMC's Stock Loan Department was suspended for 20 months from working for a securities firm in any capacity, was suspended an additional two months from acting in a principal capacity and was fined $30,000 for his role in the misconduct.
"Finders for stock loan transactions can play an important role in the markets by assisting borrowers in locating securities, especially hard-to-borrow stocks," said Susan Merrill, FINRA Executive Vice President and Chief of Enforcement. "But Raymond James traders made unjustified payments to finders who provided no service. Moreover, both firms exposed the market to the activities of an unqualified and unsupervised individual by allowing a non-registered person who had been barred from the securities industry to perform stock loan functions."
During 2004, Raymond James, on various occasions paid finders in connection with stock loan transactions when there was no apparent justification for the finder payments.
For example, a review of stock loan transactions on four days in March and April 2004 revealed 11 transactions for which two finder firms were paid despite having performed no service, including one finder firm where a Raymond James stock loan trader's son was an employee. In addition, Raymond James's books and records inaccurately reflected that a finder had provided services in connection with certain stock loan transactions in exchange for payment when, in fact, the purported finder had not performed any function.
In 2004, Raymond James and RBCCMC each allowed Dennis Palmeri, Sr. of Shields Institutional, a non-registered finder, to perform stock loan functions requiring registration. In February 1994, Palmeri was convicted in federal court of aiding and abetting his then-employer's violation of federal securities laws. The SEC then barred Palmeri from working for any broker dealer, investment advisor or investment company. The bar did not preclude Palmeri from acting as a non-registered finder, but does preclude him from performing functions requiring registration.
FINRA further found that these activities occurred because Raymond James and RBCCMC each failed to reasonably supervise the activities of their respective Stock Loan Departments.
In concluding these settlements, neither Raymond James, RBCCMC nor Tommasino admitted nor denied the charges, but consented to the entry of FINRA's findings.
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 2008, members of the public used this service to conduct 11.6 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999.
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