Jefferies has been fined $37,200 by the Financial Industry Regulatory Authority (FINRA) for supervisory failures regarding Regulation M compliance between January 2018 and September 2022.
Jefferies Receives Small Fine From FINRA
The regulator added that the fine is part of a larger $250,000 settlement which was resolved “simultaneously with similar matters.”
FINRA states: “Regulation M under the Securities Exchange Act of 1934, in relevant part, makes it unlawful for underwriters, broker-dealers, and other distribution participants to directly or indirectly ‘bid for, purchase, or attempt to induce any person to bid for or purchase, a covered security during the applicable restricted period.'”
FINRA found that Jefferies lacked adequate supervisory systems and written procedures to prevent prohibited trading activity during restricted periods under Regulation M.
This regulation aims to prevent market manipulation by barring distribution participants, such as broker-dealers, from influencing a security’s price during its offering period.
According to FINRA, Jefferies failed to conduct sufficient supervisory reviews to ensure compliance.
The regulator explained that its written supervisory procedures inadequately detailed steps to verify restricted periods or prevent impermissible trading. As a result, the firm could not confirm whether it had purchased shares of covered securities during restricted periods.
While Jefferies neither admitted nor denied the findings, it has since updated its supervisory systems to address these issues.
The fine and accompanying censure represents a minor penalty for a firm of Jefferies’ size.
