Muni Dealer Fined for Quoting and Trading at Above-Market Prices

A global broker-dealer settled SEC charges for distributing and publishing price quotes on municipal securities that did not reflect the fair market value of the securities, and for buying and selling municipal bonds at the inflated prices.  

According to the Order, the broker-dealer published daily quotes for 4,300 to 6,500 municipal bonds at above-market prices on electronic platforms without evaluating fair market value. The SEC found that the broker-dealer relied on a customer's Sophisticated Municipal Market Professional ("SMMP") status for pricing, instead of conducting independent assessments. The SEC said that this reliance led to buying bonds at inflated prices and reselling them at higher rates, with at least 51 transactions inaccurately reported. The SEC also found that these transactions were reported without noting they were "away from the market," thereby, potentially misleading other market participants.

The SEC concluded that the broker-dealer's violated MSRB Rules G-13(b)(ii) ("Quotations Relating to Municipal Securities"), G-30(a) ("Prices and Commissions"), G-14(b)(i) ("Reports of Sales or Purchases"), G-17 ("Conduct of Municipal Securities and Municipal Advisory Activities"), and G-27 ("Supervision"), as well as Section 15B(c)(1) ("Municipals") of the Exchange Act. 

To settle the charges, the broker-dealer agreed to (i) cease the improper practices, (ii) a censure, (iii) enhance its supervisory systems, (iii) pay a civil money penalty of $100,000 (of which $41,667 will be transferred to the MSRB), (iv) pay disgorgement of $11,369 and (v) pay prejudgment interest of $2,407.