FINRA Fines Southwest Securities $500,000 At Deadline
March 14, 2011
The Financial Industry Regulatory Authority has fined Dallas-based financial services company Southwest Securities Inc. $500,000 for soliciting violations related to its municipal securities business.
Southwest's violations included using paid consultants to sell municipal securities and breaking other Municipal Securities Rulemaking Board rules.
From October 2006 through April 2009, according to FINRA, Southwest paid more than $200,000 to five individuals to sell municipal securities. Through the consultants' services, Southwest received 24 municipal securities underwritings and two roles as financial advisor to Texas municipalities, FINRA said. Southwest also paid three other individuals more than $26,000 in one-time payments for municipal securities sales.
Southwest's payments to its consultants and others for the sale of municipal securities "contravened the MSRB's prohibition against such activity, and threatened to compromise the integrity of the municipal securities market," said FINRA Executive Vice President and Chief of Enforcement Brad Bennett.
Southwest violated MSRB rules by failing to file MSRB forms for more than 300 municipal securities transactions, including the G-36(OS) and G-36(ARD), on time, FINRA said. During the October 2006 to April 2009 timeframe, Southwest also failed to adequately supervise its municipal securities business according to certain MSRB rules, including the regulation of political contributions. That led to a violation of MSRB Rule G-37, which resulted in regulatory action by the Securities and Exchange Commission against the firm last March.
Southwest's settlement with FINRA will require an officer at the firm to review and confirm to FINRA that its systems and procedures are in compliance with MSRB rules.
Wealthy Still Wary Of Markets, Survey Shows
A member survey by Tiger 21, a peer-to-peer learning group for high-net-worth investors, shows they continue to have concerns about the economy.
Their exposure to public equities averages 21%, well below the historic range of 30% to 35%, and they have 14% of their portfolios in cash, compared to the traditional range of 5% to 10%.
"While the markets have certainly come a long way from the doldrums of the recession, members remain wary about whether we are in the clear or there will be more bad news," said Michael Sonnenfeldt, chairman and founder of Tiger 21.
"Tiger 21 members have been registering levels of cash in the low teens for a few years and in the mid-teens for the last two years, indicating deep concerns about the recovery and not wanting to get caught with too little cash if there is another downturn," Sonnenfeldt added.
Among those high-net-wealth investors living solely on their accumulated wealth, they have reduced their annual spending from 3% of assets to 2% of assets, and increased their cash holdings from 12% to 14%.
Members also have an average of 23% of their portfolios in real estate, 9% in private equity and 9% in hedge funds, the Tiger 21 survey found.
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