Brokerage Firm Settles FINRA Charges for Publishing Inaccurate Research Reports

A brokerage firm settled FINRA charges for (i) publishing equity research reports that included inaccurate historical stock information and (ii) failure to accurately disclose its beneficial ownership in stocks as to which it published research, among other securities law violations.

In a Letter of Acceptance, Waiver, and Consent, FINRA found that the firm published a large number of equity research reports that included price charts with inaccurate historical stock information. FINRA determined that the error was caused in part by a change in the firm's software for generating price charts that reflected five-year historical stock pricing, but labeled the chart as three-year historical information. It was also determined that the failure was caused in part by a lack of supervisory systems reasonably designed to monitor the automatically generated price charts in equity research and other financial reports.

Additionally, FINRA found that the firm failed to accurately disclose beneficial ownership information in its research reports. In over 1,600 research reports the firm either (i) neglected to disclose that it held a beneficial ownership stake of 1 percent or more, or (ii) erroneously disclosed a beneficial ownership stake of 1 percent where it did not have such a position.

As a result, FINRA determined that the firm violated Rules 2010 ("Standards of Commercial Honor and Principles of Trade"), 2241(c)(3) and (c)(4)(F) ("Research Analysts and Research Reports"), and 3110(a) ("Supervision").

To settle the charges, the firm agreed to (i) a censure and (ii) a $325,000 fine.