US SEC Records First Case of Broker-Dealer Municipal Advisor Violation

The United States Securities and Exchange Commission (SEC) on Wednesday announced that it has fined Loop Capital Markets, a Chicago-based investment bank and broker-dealer, $100,000 for violating the regulator’s municipal advisor registration rule.

SEC said it charged the broker-dealer for providing advice to a municipal city in the country without being registered to do so.

The watchdog said Loop Capital Markets neigher admitted to or denied its findings but agreed to pay the fine.

The penalty also comes with $5,456.73 in interest for disgorgement and prejudgment.

“The action marks the first time the SEC has charged a broker-dealer for violating the municipal advisor registration rule,” the market supervisor announced.

According to the regulator, between September 2017 and February 2019, Loop Capital Markets advised a city in the Midwest of the country to invest in certain fixed income securities.

The regulatory authority said the city purchased the securities based on the advise using its municipal bond issuances.

However, the SEC in an investigation conducted by Sally Hewitt and Kristal P. Olson of the Public Finance Abuse Unit, found that Loop Capital Markets “did not maintain a system reasonably designed to supervise its municipal securities activities.

The watchdog also found that the broker-dealer “had inadequate procedures, including insufficient methods to identify potential violations of the municipal advisor registration rules.”

LeeAnn Ghazil Gaunt, Chief of the Enforcement Division’s Public Finance Abuse Unit, explained that the municipal advisor registration rules were designed to protect municipal entities from abuse.

Gaunt further noted that the rules apply to all participants in the country’s financial markets.

“Registered broker-dealers must either register as municipal advisors or refrain from engaging in municipal advisory activities,” he added.

Source