Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Thomas Mead (Mead), previously associated with Drexel Hamilton, LLC, has at least one disclosable event. These events include one tax lien, alleging that Mead recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on November 18, 2024.
Without admitting or denying the findings, the firm, Ivcic, Mead, Phelan, and Steigerwald consented to the sanctions and to the entry of findings that the firm submitted retail orders for new issue municipal bonds without a basis for designating the orders as retail and with zip codes that were not associated with a retail customer. The findings stated that the firm participated in a number of offerings for new issue municipal bonds as a co-manager or a member of the selling group. The firm did not have retail customers for its orders of new issue municipal bonds. Rather, it submitted such orders on behalf of other broker-dealers who had, in turn, placed orders with the firm. On at least 572 occasions, the firm, through its representatives, submitted orders to the syndicate senior manager that it received from broker-dealer counterparties that it designated as retail without a basis to do so, and, to make it appear that the orders were for bona fide retail customers, included zip codes with the orders that were not associated with a retail customer. Additionally, on at least 44 occasions, the firm received orders from its BD counterparties that exceeded the $1 million per order maximum and, when it submitted the orders it split those orders into multiple, smaller orders to evade the limit set out in the retail period eligibility criteria. The sales of the bonds generated significant commissions for the firm. The findings also stated that Ivcic willfully violated MSRB Rules G-11(k) and G-17, both independently and by acting in contravention of Section 17(a)(2) of the Securities Act of 1933 by submitting orders that violated the retail order period eligibility criteria. FINRA found that the firm failed to establish and maintain a supervisory system, including WSPs, reasonably designed to ensure compliance with the retail period eligibility criteria. Though a significant portion of the firm’s business was participating in underwritings of municipal securities, the firm had no supervisory system in place to determine that the retail orders that it submitted during retail order periods were for genuine retail customers or that the zip codes its representatives submitted with the orders were accurate and associated with a retail customer purchasing the bonds. Moreover, the firm maintained WSPs that unreasonably contained no guidance on complying with the retail order period eligibility criteria set by issuing municipalities. The firm has since enhanced its supervisory systems, including its WSPs. As a result of the supervisory failures, the firm failed to detect the violations of MSRB Rule G-11(k). FINRA also found that Mead as head of the firm’s municipal department failed to reasonably supervise the sales of new issue municipal bonds during the retail order period. Mead failed to reasonably respond to red flags that gave him actual notice of potential misconduct including when a broker-dealer acting as syndicate senior manager for a new issue municipal offering challenged and rejected numerous orders that the firm had designated as retail because it did not believe that the orders were for retail customers. Additionally, another municipal issuer questioned the firm, including Mead, about orders that had been designated as retail that were subsequently traded on the secondary market. However, despite these red flags, Mead failed to take steps to investigate the red flags or to otherwise ensure that the firm and its representatives complied with the retail order period eligibility criteria. Mead failed to take reasonable actions to supervise this activity and Ivcic’s role in it. Mead did not review order tickets to see if they contained zip codes or check with the firm’s counterparties to confirm that the orders those firms were submitting were for bona fide retail customers. Rather, Mead merely reviewed deal folders in a cursory fashion to see if they appeared to conform to the requirements set by issuing municipalities.
