Enforcement Actions
Financial Industry Regulatory Authority (FINRA)
NOTE: Stipulations of Fact and Consent to Penalty (SFC); Offers of Settlement (OS); and Letters of Acceptance Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions & to the entry of findings. Additionally, for AWCs, if FINRA has reason to believe a violation has occurred and the member or associated person does not dispute the violation, FINRA may prepare and request that the member or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's or associated person's right to a hearing before a hearing panel, and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed.
July 2011
UBS Securities LLC
AWC/2009018057401/July 2011

UBS failed to update the company codes in the client-based database after the individual responsible for that task left the firm.

The emails indicating that the company codes had been added were not sent to the firmís Client Management Team (CMT) by another group at the firm, the Core Client Data Services Group (CCDS).

UBS employed Client Data Strategist (CDS), a senior officer in CMT. The CDS was in charge of producing a business object report that combined the research and revenue information for each client to create required non-investment banking disclosures in equity research reports. Unfortunately, the CDS continued to produce the business object report without confirming that the company codes were updated -- because the CDS continued to produce the reports, a file was created and uploaded in the firmís central disclosure database, even though it contained incomplete information.

Since the reports were completed, email alerts were not triggered at the end of the process, and as a result of the failures during the update process, equity research reports the firm published failed to include one or more required non-investment banking disclosures (non-investment banking compensation, non-investment banking securitiesrelated services and non-securities services). As a result of certain information contained in the firmís central disclosure database not being updated due to the update process failure, research analysts creating and sending information about the impacted subject companies to media outlets in connection with public appearances failed to disclose the firmís non-investment banking related compensation and the types of services (non-investment banking securities-related services and non-securities services) it provided during the prior 12 months.

Moreover, the firm failed to adequately implement its supervisory procedures concerning compliance with NASD Rule 2711(h), and the firm failed to conduct follow-up and review to ensure that its employees were performing their assigned responsibilities of collecting and updating data to generate accurate disclosures, and to have a verification process to confirm that each group was performing its task to ensure the flow of updated information at each stage had accurate disclosures. The firm failed to adequately implement its written procedures that provided for step-by-step guidance for updating the required disclosures in the relevant databases in order to reasonably ensure that they were disclosed in the research reports and in public appearances.

UBS Securities LLC : Censured; Fined $300,000
Tags:  Email    Research     |    In: Cases of Note : FINRA
Bill Singer's Comment

Ya wanna know why Wall Street can't regulate itself properly and why the three layers of self, state, and federal regulators are often ineffective? Okay, simple -- tell me what the hell all this nonsense means?

  • Client Management Team (CMT)
  • Core Client Data Services Group (CCDS)
  • Client Data Strategist (CDS)
  • Business Object Report
June 2011
Canaccord Genuity, Inc. fka Canaccord Adams, Inc.
AWC/2009016251601/June 2011

The Firm failed to adopt and implement WSPs reasonably designed to supervise its research analysts and ensure that its research reports complied with NASD Rule 2711. Although the firm maintained some relevant WSPs, those procedures did not provide any real guidance to its employees about the specific steps they needed to take to achieve compliance with Rule 2711. The WSPs required that all public appearances by firm analysts be approved by the research director, that the appropriate disclosures be made to the media outlet, that a record documenting the disclosures provided to the media be maintained, and that the firmís marketing department receive a copy of such disclosure. The WSPs made the research analyst responsible for meeting these obligations but provided little or no guidance on how these tasks could be successfully carried out or supervised.

The WSPs contained provisions broadly describing what portions of draft research reports could and could not be provided to covered companies, but failed to provide specific guidance to firm employees regarding the manner in which these requirements were to be fulfilled.

The WSPs permitted the research department to send sections of a research report to a subject company before publication to verify the accuracy of information in those sections, provided that a complete draft of the research report was first provided to the compliance department.

The Firm sent research report excerpts to a subject company before its compliance department had received a complete draft of the report, and in one of those instances, the complete draft was not sent to the compliance department. Moreover, in connection with public appearances by its research analysts, the firm failed to retain records that were sufficient to demonstrate compliance by those analysts with the disclosure requirements of NASD Rule 2711(h).

Canaccord Genuity, Inc. fka Canaccord Adams, Inc. : Censured; Fined $22,500; Required to review its supervisory system and procedures concerning research reports and the supervision of research analysts for compliance with FINRA rules and federal securities laws and regulations, and to certify in writing within 90 days that the firm completed its review and that it currently has in place systems and procedures reasonably designed to achieve compliance with those rules, laws and regulations
Tags:  Research    Supervision    WSP     |    In: Cases of Note : FINRA
Bill Singer's Comment
Time and time again, firms get lulled into a false security that merely having written prohibitions is sufficient oversight and supervision. As this settlement amply demonstrates, it's not enough to prohibit an activity -- you must specify what is prohibited, how notifications/approvals must be obtained, and your Compliance Department must be more than a mere repository for rubber stamps that say "Approved" or "Denied".
March 2011
Dahlman Rose & Company, LLC
AWC/2009016138801/March 2011
The Firm permitted a person registered solely as a general securities principal who had not passed the necessary qualification examination to approve research reports a firm research analyst prepared, which the firm issued. The firm published a research report regarding a company, which did not disclose that the firm had co-managed an initial public offering of securities for the company during the past 12 months. The firm began making a market in a companyís securities, and on the same day the firm published a research report concerning the same company that did not disclose that it was making a market in the companyís securities. The firm published research reports containing disclosures NASD Rule 2711(h) required that were not presented on or referred to on the front page of such reports.
Dahlman Rose & Company, LLC : Censured; Fined $17,500
Bill Singer's Comment
Two of the more fundamental items on the "research" checklist for compliance departments. One, reports must disclose recent co-managed/managed IPOs.  Two, among the most basic of conflicts is issuing research on a company that your firm makes a market in.  Oops.
Enforcement Actions