By Robert H. Rex, Esq.
The Financial Industry Regulatory Authority (FINRA) is the largest independent regulator for all securities firms doing business in the United States. FINRA's chief role is to protect investors by maintaining the fairness of the U.S. capital markets.
All stockbrokers and broker dealers (brokerage firms) are required to be licensed by and subject to the rules and regulations of FINRA. Each month FINRA publishes disciplinary actions against brokers and broker dealers. Discipline can range from monetary fines and suspensions, or in extreme cases, revocation of licensing and a bar from the securities industry.
See the FINRA website for current and historical disciplinary actions.
Maxim Group LLC (CRD #120708, New York, New York) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured, fined $95,000, required to pay
$10,123.33, plus interest, in restitution to investors and revise its WSPs. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry
of findings that it failed to execute orders fully and promptly. In transactions for or with customers, the firm failed to use reasonable diligence to ascertain the best inter-dealer market and buy or sell in such market so that the resultant price to its customers was as favorable as possible under prevailing market conditions. The findings stated that the firm failed, within 90 seconds after execution, to transmit to the FINRA/NASDAQ Trade Reporting Facility (OTC:FNTRF) last sale reports of transactions in designated securities, and
failed to designate through the FNTRF some of the reports as late. The firm failed to report the correct execution time to the FNTRF in some last sale reports of transactions in
designated securities. The findings also included that the firm reported to the FNTRF last sale reports of transactions in designated securities it was not required to report, incorrectly
reported principal transactions as agent to the FNTRF, reported some principal transactions as agent to the Over-the-Counter (OTC) Trade Reporting Facility® (OTCRF), and inaccurately reported a few riskless principal transactions as principal to the FNTRF. FINRA found that the firm failed to report to the FNTRF and the OTCRF the correct symbol indicating whether transactions were a buy, sell or cross in short sale transactions. FINRA also found that the firm failed to show the terms and conditions on brokerage order memoranda, failed to show the correct execution time on some broker order memoranda, and failed to document
two transactions on its trading ledger.
In addition, FINRA determined that the firm failed to report the correct contra-party's identifier for transactions in TRACE-eligible securities to TRACE, and failed to report
transactions in TRACE-eligible securities it was required to report. The findings also stated that the firm failed to provide written notification disclosing to its customers that transactions were executed at an average price, and failed to provide written notification disclosing to its customers the correct capacity and correct compensation type in transactions. Moreover, FINRA found that the firm's supervisory system did not provide for supervision reasonably designed to achieve compliance with applicable securities
laws, regulations and FINRA rules concerning trade reporting, short sale reporting, trading during a trading halt, and books and records. Furthermore, FINRA found that the firm sold corporate bonds to customers and failed to sell such bonds at a price that was fair, taking into consideration all relevant circumstances, including market conditions with respect to each bond at the time of the transaction, the expense involved and that the firm was entitled to a profit. For a month, the firm made available a report on the covered orders in national market system (NYSE:NMS) securities it received for execution from any person which included incorrect information regarding the number of cancelled shares, the average realized spread, the average effective spread, price-improved average time, the number of at-the-quote shares, the at-the-quote average time, the number of outside-the-quote
shares, the outside-the-quote average amount and the outside-the-quote average time. The findings also stated that the firm failed to establish, maintain and enforce written policies and procedures reasonably designed to prevent trade-throughs of protected quotations in NMS stocks that do not fall within any applicable exception, and if relying on an exception, are reasonably designed to assure compliance with the terms of the exception. The firm's supervisory system did not provide for supervision reasonably design to achieve compliance with Securities and Exchange Commission (SEC) Rule 611(c)
of Regulation NMS; did not include WSPs providing for the specific steps required to comply with the self-help exemption of SEC Rule 611; and did not provide for supervision
reasonably designed to achieve compliance with applicable securities laws, regulations and FINRA rules addressing minimum requirements for adequate WSPs in short sale reporting, order handling and OATS reporting. (FINRA Case #2009017655401)
If you have questions about investment losses or the way your brokerage account has been handled, please contact us to discuss your legal rights.
Free initial consultation.
561 391 1900
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.