April 4 David Lerner Associates, the New York-based brokerage that regulators say misled investors in its marketing of municipal bonds and mortgage-backed securities, was fined $2.3 million by an industry regulatory panel on Wednesday.
The ruling by the Financial Industry Regulatory Authority, the retail brokerage industry's self-watchdog, resolved charges against the brokerage from nearly two years ago.
The FINRA hearing panel said the firm sold municipal bonds and collateralized mortgage obligation transactions to its retail customers at "unfairly high prices," causing investors to receive lower yields than they would have otherwise received.
David Lerner's head trader William Mason was also fined $200,000 and suspended from the securities industry for six months.
FINRA said that David Lerner Associates' supervisory system for its municipal bonds and CMOs was "inadequate on several levels." The panel said the system failed to establish and maintain adequate procedures for monitoring the fair pricing and time receipt of orders.
The firm said it would appeal the decision.
"The hearing panel decision reflects FINRA's attempt to unfairly seize funds from a broker-dealer by making allegations which are simply not based on facts, recognized industry standards or current law," the firm said in a statement.
The industry regulator had filed an enforcement complaint against the brokerage's owner, David Lerner, in January for allegedly misleading investors about the risk and valuation of a $2 billion real estate security. (Reporting By Ashley Lau in New York; Editing by Walden Siew and Maureen Bavdek)