Dec 27 Wall Street's watchdog has fined five
large firms over $4.48 million for seeking reimbursement for
payments to lobbyists using proceeds from municipal and state
The Financial Industry Regulatory Authority said on Thursday
that it fined Citigroup Inc, Goldman Sachs Group Inc
, JPMorgan Chase & Co, Bank of America Corp's
Merrill Lynch and Morgan Stanley.
Wall Street's self-imposed watchdog said the banks unfairly
sought reimbursement of fees they paid to the California Public
Securities Association between January 2006 and December 2010 by
requesting they be refunded as underwriting expenses from the
FINRA said the firms "violated" fair dealing and supervisory
rules of the Municipal Securities Rulemaking Board by seeking
reimbursement for those payments to Cal PSA, a political
association whose activities include lobbying on behalf of
companies seeking to influence California state government.
"It was unfair for these underwriters to pass along the
costs of their Cal PSA membership to the municipal and state
bond taxpayers, neglecting to disclose that these costs were
unrelated to the bond deals," FINRA's chief of enforcement, Brad
Bennett, said in a statement.
The firms, which were fined more than $3.35 million and are
required to pay $1.13 million in restitution to certain issuers
in California, neither admitted nor denied the charges, but
consented to the entry of FINRA's findings.
"We are pleased to resolve this matter and look forward to
putting this behind us," Citi spokesman Scott Helfman said.
Morgan Stanley spokesman Mark Lake also said the firm is
"pleased to have resolved this issue in a satisfactory manner
for the firm."
Goldman Sachs said the company voluntarily refunded publicly
disclosed Cal PSA fees in February 2011 for those charged as
underwriting expenses on state-level issuances it lead
underwrote, at the request of California's treasurer's office.
"At that time, we also discontinued the longstanding
industry-wide practice of seeking reimbursement for such fees on
offerings by state and local governments in California," said
Goldman spokeswoman Tiffany Galvin. "We're pleased to have
resolved this matter."
Merrill did not immediately comment on the sanction.
JPMorgan declined to comment.