WASHINGTON - The Financial Industry Regulatory Authority fined Southwest Securities, Inc. $500,000 for using paid consultants to solicit municipal securities business, in violation of Municipal Securities Rulemaking Board rules.
Between October 2006 and April 2009 Southwest, based in Dallas, Texas, paid unaffiliated individuals, including three former Texas muni-issuer officials, to solicit securities business on behalf of the firm, violating MSRB Rule G-38. FINRA said.
Specifically, FINRA found that Southwest received more than $1.9 million in gross revenues from 24 muni underwritings and two muni-financial adviser stints to Texas municipalities the consultants obtained for the firm. Southwest paid the consultants $200,000.
G-38 prohibits broker-dealers from paying anyone who is not affiliated them from soliciting business on their behalf.
The firm also violated Rule G-36 by failing to file forms in connection with transactions, G-14 by failing to accurately report transaction data to the MSRB’s Real-Time Transaction Reporting System and G-27 for supervisory failures.
A spokesperson for Southwest was not immediately available for comment.
