A broker-dealer settled FINRA charges for failing to use approved methods when estimating per-share Direct Participation Program ("DPP") and Real Estate Investment Trust ("REIT") valuation information distributed to customers.
In a Letter of Acceptance, Waiver and Consent, FINRA stated that the broker-dealer's security pricing team provided outdated DPP and REIT valuations, in violation of NASD Rule 2340(c) ("Customer Account Statements-DPP and Unlisted REIT Securities") and FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade"). FINRA found that the broker-dealer did not have sufficient supervisory procedures in place to review the security pricing team's treatment of valuation data for DPPs and REITs, resulting in violations of FINRA Rule 3110 ("Supervision"). Additionally, the broker-dealer's distribution of the inaccurate valuations to its customers in their monthly and quarterly account statements led to its failure to maintain accurate books and records, in violation of FINRA Rule 4511 ("General Requirements").
To settle the charges, the firm agreed to a (i) censure and (ii) $300,000 fine.
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