A settlement has been reached in the case of a Pittsburgh-based broker-dealer accused of municipal bond rule violations, Advisor Hub reports.
NewEdge Securities, the brokerage arm of hybrid firm NewEdge Capital Group, agreed to financial sanctions of just over $1 million for misleading bond purchases and failing to preserve electronic communications.
In a letter of acceptance, waiver and consent, the Financial Industry Regulatory Authority said that between January 2018 and May 2022, NewEdge violated Municipal Securities Rulemaking Board (MSRB) Rules G-11 and G-17 by submitting orders for new issue municipal bonds without disclosing that the bonds were for the firm’s dealer account and not for retail clients. This gave an advantage to NewEdge, since FINRA said the issuers “typically prioritize sales of bonds to retail and institutional customers, who are likely to hold the bonds rather than quickly trade them, over broker-dealers seeking bonds for their own inventories.”
NewEdge also violated MSRB Rule G-14 by failing to report dealer transactions to the MSRB’s Real Time Transaction Reporting System, according to FINRA.
In another infraction, FINRA found that NewEdge violated MSRB Rule G-27 by failing to establish, maintain, and enforce a supervisory system, including written supervisory procedures, reasonably designed to ensure compliance with MSRB Rules G-11 and G-14. The firm also failed to reasonably respond to red flags indicating it was obtaining improper allocations of new issue municipal bonds. Furthermore, NewEdge was found to have violated MSRB Rules G-9(b) and G-27(e) by failing to preserve and review approximately 30,000 Bloomberg instant messages.
The firm did not admit or deny the allegations, but was censured, fined $275,000, and ordered to pay disgorgement of $750,746 plus interest.
A NewEdge spokesperson said that the firm was pleased to have resolved the matter. The issue “was isolated to a single representative’s management of personal assets within a legacy acquired division—an area no longer significant to our operations,” the spokesperson added. “No NewEdge Capital Group client funds were at risk, no client assets were misused, and no clients were harmed.”
The attorneys at Hyman Cotter PC 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 Hyman Cotter PC at 312-291-4600 or through our online contact form.
