The veteran-owned investment bank Academy Securities has been censured and fined $30,000 by the Financial Industry Regulatory Authority for failing to file Form G-37 reports disclosing the extent of its underwriting base in a timely manner.
Without admitting or denying the findings, Academy agreed to the fine and censure in violation of MSRB Rule G-37 on political contributions and MSRB Rule G-27 on supervision.
MSRB Rule G-37 requires brokers, dealers and municipal securities dealers to file by the last day of the month that ends the quarter a Form G-37, detailing contributions made to issuer officials, bond ballot campaigns, payments made to political parties or political subdivisions, as well as a list of issuers the dealer has engaged in business with over the quarter. The rule was established in 1994 to curb the once rampant pay-to-play practice in the muni industry.
From April 2018 to February 2022, Academy failed to submit 14 Form G-37 reports on time, submitting them between one and 645 days late, FINRA alleged. The firm filed another eight reports during this time which omitted a total of 60 municipal underwritings that the firm acted as senior manager, co-senior manager or co-manager on.
Academy also failed to maintain written supervisory procedures designed to help the firm achieve compliance with Rule G-37, which is a violation of Rule G-27 on supervision. That rule requires that firms have in place and adhere to written procedures designed to ensure compliance with all relevant laws and regulations.
"The WSPs failed to assign anyone the responsibility to maintain a record of reportable information, did not identify the sources from which reportable information should be collected, and did not provide for a review of the Form G-37 reports to ensure the accuracy of their content," FINRA said.
The firm's compliance department relied on a spreadsheet of municipal underwritings prepared by the firm's municipal underwriting team, but there were omissions present and the compliance team failed to conduct a review that would have pointed these out ahead of the firm's Form G-37 filing.
Academy Securities chief compliance officer Michael Boyd said the firm "neither admits nor denies the findings of FINRA in the AWC."
"FINRA's findings with respect to compliance with MSRB Rule G-37 related solely to the timing of the filings and completeness of required information for issues with which it had done business in the prior quarter," Boyd said. "FINRA did not find that the Firm failed to report any political contributions that required disclosure under MSRB Rule G-37. Indeed, during the relevant time period, neither the Firm nor its employees made any political contributions requiring disclosure under MSRB Rule G-37."
"Similarly," Boyd noted, "FINRA's findings related to the Firm's alleged violation of MSRB Rule G-27 did not identify deficiencies specific to the Firm's process for monitoring and tracking political contributions."
