Introducing Firm Settles Charges for Unfair Markups

An introducing broker settled FINRA charges for unfair markups and markdowns in corporate bond transactions.

According to the AWC, the introducing broker charged markups or markdowns on 137 corporate bond transactions ranging from 2.30 percent to 9.34 percent. FINRA found that the introducing broker was not the firm actually executing the trades; rather the firm routed to a separate clearing firm which charged its own markup. FINRA also found that the broker "performed no due diligence to determine if it was buying or selling corporate bonds in the best market so that the resultant prices were as favorable to its customers as possible under current market conditions," as required under Best Execution rules. 

As a result, FINRA found that the firm violated FINRA Rules 2121 ("Fair Prices and Commissions"), 2010 ("Standards of Commercial Honor and Principles of Trade"), 5310 ("Best Execution and Interpositioning") and 3110 ("Supervision").

To settle the charges, the firm agreed to (i) a censure; (ii) pay a $200,000 fine; (iii) pay restitution plus interest; and (iv) an undertaking to retain an independent consultant.