FINRA fines broker $15,000 for unfair prices
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The Financial Industry Regulatory Authority has fined Wichita-based Riedl First Securities Company of Kansas $15,000 for charging unfair prices on 160 corporate bond transactions, still violating MSRB Rule G-30 on fair pricing and MSRB Rule G-27 on supervision.
Without admitting or denying the findings, agreed to a censure, a total fine of $60,000, $15,000 of which is for violating MSRB rules, as well as restitution of $102,181.97.
“Riedl determined the mark-ups on purchases in proceeds transactions without considering the mark-downs on the corresponding sales, and the total mark-ups/markdowns were excessive considering all the relevant factors,” FINRA said. “The mark-ups/markdowns were not justified by market conditions; execution cost; the type or availability of the security; the value of any brokerage services rendered by the firm; or any relevant factor.”
The firm’s failure to consider these resulted in what FINRA calls an “average combined mark-up/markdown” of 4.73% on the proceeds of the transactions and excessive mark-ups and mark-downs in the sum of $102,181.97.
“For example, on January 22, 2019, Riedl recommended that Customer A sell a United States Steel Corporation bond for $50,083.46 charging a mark-down of $1,372.50 on the sale,” FINRA said. “The proceeds on that sale were used to buy a position of $49,749.33 in a bond from Ensco Plc also on January 22, 2019 and the firm charged a $1,245.50 mark-up on the purchase.”
The firm then violated FINRA Rules 2121 and 2010 and for its role in failing to maintain a supervisory system to catch these failures as well as written supervisory procedures, the firm violated FINRA Rule 3110 and Rule 2010.
MSRB Rule G-30 on fair pricing and FINRA Rule 2121 require a dealer acting in a principal capacity to mark-up or mark-down the transaction from the prevailing market price.
“The firm’s WSP’s did not require the PMP to be the basis for principal trades,” FINRA said. “In addition, Riedl did not enforce its WSPs or apply the relevant factors from FINRA rule 2121 and MSRB Rule G-30 when determining appropriate mark-ups and mark-downs on specific transactions.”
“Riedl’s WSPs also failed to describe the steps the firm should take to ensure that the firm’s pricing decisions on principal trades with customers were based on the pricing information identified in FINRA Rule 2121 and MSRB Rule G-30,” FINRA said.
Failing to supervise these factors properly, the firm violated MSRB Rule G-27 on supervision. That rule requires that a firm have and follow written supervisory procedures reasonably designed to ensure compliance with all applicable laws and rules.
That action comes just days
Riedl did not respond to requests for comment.
