Representing financial professionals, financial institutions and investors in investment loss, employment and disclosure matters, and in regulatory investigations nationwide.

FINRA penalizes NewEdge over alleged mispricing on bond trades

On Behalf of | Mar 13, 2024 | Firm News

A Pittsburgh-based brokerage firm has reached a settlement with the Financial Industry Regulatory Authority over allegations of unfair pricing in corporate and municipal bond transactions, according to AdvisorHub.

The case involves NewEdge Securities, the brokerage arm of hybrid firm NewEdge Capital Group.

According to FINRA’s letter of acceptance, waiver and consent, NewEdge is alleged to have charged customers unfair prices on 62 corporate bond transactions and six municipal bond transactions between June 2020 and March 2023. By failing to correctly assess the prevailing market price in those transactions, the firm caused its customers to pay more than they should have or receive less than they should have, the letters said, costing the customers nearly $45,000.

FINRA also said NewEdge failed to set up and maintain an adequate supervisory system, including written supervisory procedures, to ensure it was complying with the authority’s bond transaction requirements and fair pricing obligations per the Municipal Securities Rulemaking Board

NewEdge was found to have FINRA Rule 2121, requiring fair pricing, Rule 3110, requiring reasonable and written supervisory procedures, and Rule 2010, requiring members to observe high standards of commercial honor and just and equitable principles of trade.

Without admitting or denying the findings, NewEdge agreed to a censure and to pay a $90,000 fine and almost $45,000 in restitution.  The company’s managing partner, Rob Sechan, said the trades were linked to an independent broker-dealer taken over by NewEdge in 2021, Mid Atlantic Capital.

He said the action taken by FINRA “does not concern any intentional failure to follow FINRA rules. It is more issues of technical compliance.”  FINRA said that over the past year, NewEdge has implemented a new firm-wide system to “address prevailing market price” calculations.

The attorneys at Lewitas Hyman include former senior attorneys at the SEC whose legal experience and industry knowledge make them uniquely qualified to provide counsel on securities regulatory, compliance and enforcement matters. Our attorneys fully understand the regulatory scrutiny financial professionals and their firms face from the various regulators that oversee the financial services industry. If your firm is facing an investigation from a regulatory agency, please contact Lewitas Hyman at (888) 655-6002 or through our online contact form.