Finra fined National Securities Corporation $9 million for alleged regulatory violations, including that the broker-dealer attempted to artificially influence the market for public offerings it underwrote.
Finra accused the firm of negligently omitting material information to investors, making inaccurate representations to Finra, and failing to supervise one of its registered representatives.
National Securities consented to Finra’s findings without admitting or denying them, according to the regulator’s June 23 order.
“Investors are entitled to rely on a market that is free from artificial price movement created by underwriters,” Jessica Hopper, head of Finra’s Department of Enforcement, said in a statement. “We will continue to vigilantly enforce rules designed to prevent underwriters from influencing the market for an offered security, including supporting the offering price by creating a perception of aftermarket demand.”https://d846646e1671b5ec1df15380898ae7b6.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html
National Securities, which was bought by financial services firm B. Riley Financial in 2021, has approximately 574 registered representatives and 119 branch offices, according to Finra’s order.
“National Securities Corp. is pleased to have resolved this legacy matter and remains fully committed to complying with its regulatory requirements as it focuses on supporting its clients,” a B. Riley spokeswoman said in a statement.
She added that National Securities has cooperated with Finra, since exited its investment banking business, and overhauled its compliance processes. The alleged regulatory violations occurred prior to B. Riley’s acquisition of the company.
“These sanctions do not involve any of B. Riley’s pre-existing banking, trading, research or brokerage businesses,” the spokeswoman said.
Finra said National Securities’ conduct was intended to artificially stimulate demand and support the price of certain offered securities, whose aftermarket performance was important to the firm’s ability to generate future investment banking revenue.
While acting as an underwriter for three initial public offerings and seven follow-on offerings, National Securities allegedly violated a regulation prohibiting underwriters, during a restricted period, from attempting to induce any person to bid for or purchase any offered security after trading begins, Finra said.
JEFFREY NEWMAN, A FORMER PROSECUTOR IS A WHISTLEBLOWER LAWYER WITH THE FIRM NEWMAN & SHAPIRO AND HE CAN BE REACHED AT 617-823-3217 OR JNEWMAN@NEWMANSHAPIRO.COM