Bonds

FINRA fines broker $10,000 for violating muni rule

A registered general securities representative has agreed to pay $10,000 to settle Financial Industry Regulatory Authority charges that he violated the Municipal Securities Rulemaking Board’s fair dealing rule when he provided incorrect and misleading account reports to a customer.

Antoine Nabih Souma agreed to pay the fine and be subject to a two-month suspension from associating with any FINRA member in all capacities.

In so doing, Souma neither admitted nor denied FINRA’s findings that he violated MSRB Rule G-17 as well as FINRA Rules 2210(d)(1)(A), 2210(d)(1)(B) and 2010 regarding fair and balanced communications and false or misleading statements. His total fine is $20,000.

FINRA found that from November 2014 to December 2015, Souma, who was at the time, affiliated with JP Morgan Securities (JPMS), provided six incorrect and misleading account reports to a JPMS customer.

The reports included incorrect account values and performance information, FINRA found. They also omitted positions held in the customer’s accounts and in one report, understated the amount of commissions that the customer paid for transactions, including municipal bond transactions.

Souma was first registered with FINRA in August of 2000 as a general securities representative and later, from July 2010 to June 2016, was registered with FINRA as a GSR through association with JPMS. FINRA records show that Souma subsequently registered with Morgan Stanley until 2020, and since 2020 has been registered at Insigneo Securities and Galliott Capital Advisors.

According to the letter of acceptance, waiver and consent, the account reports Souma provided in response to periodic requests from the customer, included incorrect information about the customer’s municipal securities, corporate bonds, structured products and other related securities holdings and transactions.

MSRB Rule G-17 requires fair dealing and avoidance of deceptive practices. In the AWC, FINRA reiterated that “providing inaccurate or misleading information to a customer may constitute a violation of Rule G-17.”

Under FINRA Rule 2210(d)(1)(A), all member communications with the public must be fair and balanced. This must include information to provide customers with a sound basis for evaluating the facts related to any particular security, industry or service. The rule also requires that member communications not omit material facts that would cause the communication to be misleading to the customer.

FINRA Rule 2210(d)(1)(B) prohibits members from making false, exaggerated, unwarranted or other misleading statements or claims in any communication. According to FINRA,
a violation of Rule 2210 is also a violation of Rule 2010, which requires members to observe high standards of honor and “just and equitable principles of trade” when conducting business.

Because FINRA found that the purportedly customized reports Souma provided to the customer contained incorrect information, understated commissions, and overstated account values and performance during certain time periods, it concluded that Souma violated FINRA Rules 2210 and 2010 and MSRB Rule G-17.

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