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Broker-Dealer Settles FINRA Charges for Violating "Payments for Market Making" Rule

Steven.Lofchie@cwt.com's picture
Commentary by Steven Lofchie

A broker-dealer agreed to settle FINRA charges for improperly charging an issuer $6,000 for filing a Form 211, in violation of FINRA Rule 5250. The filing of Form 211 is required in order for price quotes on the firm to be submitted on the OTCQX market. However, the price of the filings is required to be borne by the broker-dealer.

According to the Letter of Acceptance, Waiver and Consent, Euro Pacific Capital, Inc. also violated FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade). To settle the charges, Euro Pacific Capital, Inc. consented to a censure and to pay a fine of $10,000.

Commentary

Perhaps this is a rule that requires revisiting.  It is clearly to the benefit of the issuer that its shares should have a trading market.  On the other hand, the broker-dealer that files a Form 211 can expect to realize only a very small part of any benefit that results from the filing of the Form.  So why not let issuers pay for the filing of the Form?  Would it provide investors in small companies with liquidity that they might not otherwise have?  If so, does that serve the public policy goal of promoting capital formation?  

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