Yoomi Lee | Bloomberg Law FINRA News Release, FINRA Fines Sun Trust Robinson Humphrey, Sun Trust Investment Services a Total of $5 Million for Auction Rate Securities Violations (July 26, 2011); FINRA Letter of Acceptance, Waiver and Consent No. 2008016036101 (June 29, 2011); FINRA Letter of Acceptance, Waiver and Consent No. 2008013864101 (June 29, 2011) The Financial Industry Regulatory Authority (FINRA) announced that registered broker-dealers, SunTrust Robinson Humphrey, Inc. (SunTrust RH) and SunTrust Investment Services, Inc. (SunTrust SI and together, Respondents) submitted a Letter of Acceptance, Waiver and Consent to settle charges in connection with auction rate securities (ARS) violations. Without admitting or denying the findings, SunTrust RH and SunTrust SI were censured and consented to pay $4.6 million and $400,000 in fines, respectively. In determining the appropriate sanctions, FINRA took into consideration Respondents' remedial efforts, including, (1) completing the voluntary repurchase of the ARS from certain customers, and (2) agreeing to participate in a special arbitration program administered by FINRA for eligible investors to resolve claims for consequential damages. SunTrust RH's Misconduct In the summer of 2007, SunTrust RH became aware of the unstable ARS market, FINRA claimed. Nevertheless, SunTrust RH allegedly violated NASD Rule 2110 and MSRB Rule G-17 by failing to adequately disclose to its sales representatives its concerns regarding whether it could continue to support its municipal ARS issues. Moreover, SunTrust RH allegedly encouraged its sales representatives to sell ARS so that the firm could reduce its inventory. As a result, certain sales representatives continued to market and sell such ARS as safe and liquid. Additionally, SunTrust RH purportedly shared material non-public information regarding the potential refinancing of certain ARS issues with SunTrust Bank, Inc. (Bank) in violation of MSRB Rule G-17. Specifically, the Bank allegedly was exploring investing in SunTrust RH-issued ARS as an arms-length investor for its investment portfolio, and SunTrust RH negligently included certain material information that was not publicly available to other investors. As a result, SunTrust RH breached the policies and procedures that were in place to limit or contain the flow of material non-public information between it and its affiliates. FINRA further alleged that SunTrust RH used advertising and marketing materials that were not "fair and balanced" in violation of NASD Rules 2210, 2211, and 2110, and MSRB Rule G-21. In particular, the materials allegedly failed to adequately disclose the risks associated with ARS, including the risk that ARS auctions could fail, making the investment illiquid for a significant amount of time. SunTrust RH also purportedly made misleading comparisons between ARS and other materially different investments in its advertising materials. Finally, according to FINRA, SunTrust RH failed to establish and maintain adequate supervisory procedures that were reasonably designed to ensure that it marketed and sold ARS in compliance with federal securities laws and applicable NASD and MSRB rules. As a result, the firm was charged for violating NASD Rules 3010 and 2110, and MSRB Rule G-27. SunTrust SI's Misconduct According to FINRA, SunTrust SI primarily sold municipal bond ARS underwritten by SunTrust RH, among others types of ARS. FINRA alleged that from May 2006 through February 2008, SunTrust SI used advertising and market materials for ARS that were not fair and balanced. Specifically, the materials did not provide investors with adequate information so that they could evaluate their purchase, and it did not include risks associated with ARS. As a result, FINRA charged SunTrust SI with violating NASD Rules 2210, 2211, and 2110, and MSRB Rule G-21. FINRA alleged also that SunTrust SI failed to establish and maintain a supervisory system that was reasonably designed to comply with NASD and MSRB rules in the marketing and sale of ARS in violation of NASD Rules 2210, 2211, 3010, and 2110, and MSRB Rules G-21 and G-27. In particular, SunTrust SI purportedly failed to maintain policies and procedures that were reasonably designed to ensure that its sales representatives accurately described the risks associated with ARS to its customers.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)