FINRA fines Moloney Securities for failures related to “marking the close” activities

Maria Nikolova

The firm did not have a system or written procedures reasonably designed to supervise for possible indicators of marking the close activity.

Moloney Securities, Co., Inc. has agreed to pay a fine of $100,000 as a part of a settlement with the United States Financial Industry Regulatory Authority (FINRA).

From January 2013 through April 2015 (the “Relevant Period”), Moloney failed to establish and maintain a supervisory system reasonably designed to:

  1. achieve compliance with FINRA’s suitability rule with respect to qualitative suitability and concentration in high-risk products; and

  2. achieve compliance with applicable NASD and FINRA Rules pertaining to the detection and prevention of a form of manipulative trading known as marking-the-close.

“Marking the close” is the execution of transactions in a security at or near the end of the trading day in order to affect the security’s closing price. If successful, the marking activity may make the value of the security appear to be higher or lower than it otherwise was during the trading day, which could allow the manipulator to benefit from the artificially affected price. Marking the close is a violation of Section 10(b) of the Securities Exchange Act of 1934 (“SEA”) and SEA Rule 10b-5 and FINRA Rules 2020 and 2010.

During the Relevant Period, Moloneey failed to establish and maintain a supervisory system reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA rules, prohibiting marking the close.

Specifically, Moloney did not conduct any surveillance or conduct supervisory reviews for possible indicators of marking the close activity. The firm also failed to establish, maintain, and enforce written supervisory procedures to monitor for potential marking the close activity.

The firm was found not have had a system or written procedures reasonably designed to supervise for possible signs of marking the close activity.

Finally, Moloney has failed to reasonably investigate two of its representatives who frequently executed purchase or sale orders of common stock of Company X, a thinly-traded security, at or near the close of the market during 2013.

By virtue of the foregoing, Moloney violated NASD Rule 3010 and FINRA Rules 3110 and 2010.

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