Samuel A. Ramirez & Co. has agreed to pay a $35,000 fine to settle Financial Industry Regulatory Authority charges it violated municipal securities rules governing information reporting, recordkeeping and supervision.
The New York-based firm agreed to be censured, pay the penalty, and remedy alleged problems with its supervisory system. Ramirez neither admitted or denied FINRA’s findings that the firm violated Municipal Securities Rulemaking Board Rules G-34 on CUSIP numbers, G-8 on books and records, and G-27 on Supervision.
“From April 2011 through May 4, 2018, Ramirez failed to submit accurate minimum denominations and maximum interest rates to the MSRB's Short-Term Obligation Rate Transparency (SHORT) System, as required by MSRB Rule G-34,” FINRA found. “Additionally, Ramirez failed to record in the firm's books and records the accurate maximum rates applicable at the time of certain interest rate resets as required by MSRB Rule G-8. Further, Ramirez failed to establish and maintain a supervisory system, including written supervisory procedures, reasonably designed to ensure compliance with the reporting requirements of MSRB Rule G-34 in violation of MSRB Rule G-27.”
Among the findings of FINRA examiners was that Ramirez failed to report a minimum denomination for approximately 1,660 submissions involving 11 CUSIPs and inaccurately reported the maximum interest rate for approximately 1,300 submissions involving five CUSIPs. The reporting failures occurred, according to FINRA, because the firm's reporting system did not require the entry of the minimum denomination field.
“When Ramirez submitted information to EMMA regarding certain CUSIPs, it did not populate the minimum denomination field, and rather than rejecting the report as incomplete, the system accepted the submission and populated the field with a zero,” FINRA found. “The maximum interest reporting failures occurred because the firm reported the auction's interest rate rather than the ARS's (auction-rate securities') maximum interest rate.”
The recordkeeping violations stemmed from FINRA’s determination, based on a review of the firm's 2017 records, that Ramirez failed to keep accurate internal records of the maximum interest rate field in 64 instances as required by Rule G-8.
FINRA commonly assesses supervision rule violations where it finds a pattern of other missteps. MSRB Rule G-27 requires that dealers have supervisory systems in place reasonably designed to ensure compliance with all applicable laws and rules. FINRA found that Ramirez’ supervisory regime fell short of the mark.
“The firm's written supervisory procedures related to SHORT System reporting were only operational in nature and were limited to describing the steps to be taken when submitting information to the SHORT system,” FINRA found. “The firm, however, lacked a supervisory system, including written supervisory procedures, to review the accuracy of the information it submitted to the SHORT system, such as an exception report to alert the firm to make corrections when it received the confirmation file from the MSRB.”
Of the fines, $20,000 was for the reporting and record keeping violations, and the remaining $15,000 was for the supervisory violation. As part of the agreement, Ramirez said it will contact FINRA within 30 days to notify the regulator that the supervisory system has been modified to comply with the rules.
The firm did not respond to a request for comment.
