Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Tuesday, January 8, 2008

FINRA Fines 19 Broker-Dealers for Overstating Advertised Trade Volume

FINRA fined 19 broker-dealers a total of $2.8 million for substantially overstating their advertised trade volume to three private service providers.  FINRA compared the firms' advertised trade volume in selected securities with the firms' executed trade volume for the same securities in August 2006 and found substantial overstatements for each firm in one or more of the securities reviewed. FINRA also found that, prior to September 2006, all of the firms lacked an adequate supervisory system and procedures for communicating trade volume to such services.  The firms' overstated trade volumes were made available to market participants by the service providers. The service providers also used the firms' inaccurate advertised trade volumes to compile rankings and reports, including reports that rank the most active broker-dealers by security.

In the actions announced today, eight firms were fined $200,000 each (Broadpoint Capital, Inc., CIBC World Markets Corp., Lehman Brothers, Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., Needham & Company, LLC, Robert W. Baird & Co., Inc., Thomas Weisel Partners, LLC and UBS Securities, LLC). Six firms were fined $150,000 each (Bear, Stearns & Co., Inc., BMO Capital Markets Corp., Cowen and Company, LLC, Deutsche Bank Securities, Inc., Leerink Swann & Company, Inc. and RBC Capital Markets Corp.). Four firms were fined $50,000 each (Friedman, Billings, Ramsey & Co., Inc., Jefferies & Company, Inc., JMP Securities, LLC and Pacific Crest Securities, Inc.).

The fine for one firm, Piper Jaffray & Co., was reduced to $100,000 because the firm conducted its own extensive internal investigation and then voluntarily provided the results to FINRA.

In concluding these settlements, the 19 firms neither admitted nor denied the charges, but consented to the entry of FINRA's findings.

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