By Chad Kohler
The Financial Industry Regulatory Authority (FINRA), the self-regulatory
organization that oversees brokerage firms, announced this month that
Huntington Investment Company, the Columbus, Ohio-based brokerage firm
and wholly-owned subsidiary of Huntington Bancshares, Inc., was fined
$25,000 and censured for violating industry rules designed to protect
buyers of municipal securities, including failing to disclose substantial
political contributions made by several Huntington executives.
According to the Letter of Acceptance, Waiver and Consent (AWC) agreed
to by Huntington, from March 2011 through January 2012, Huntington acted
as an underwriter for certain municipal bond anticipation notes that were
exempt from registration under the federal securities laws. The Municipal
Securities Rulemaking Board (MSRB), which writes investor protection rules
for municipal securities offerings, has established special rules under
MSRB Rule G-32 that underwriters must follow when offering municipal securities
(like the bond anticipation notes at issue underwritten by Huntington)
that are exempt from federal registration requirements.
FINRA's investigation found that Huntington violated MSRB Rule G-32
in numerous ways.
First, Huntington failed to notify the MSRB through the Electronic Municipal
Market Access System (EMMA) that the bond anticipation notes it was underwriting
were being offered without preliminary official statements or official
Second, Huntington engaged in advance refunding offerings (which involve
paying off previously issued notes with newly issued notes that pay interest
at a lower rate), but failed to file required documents with the MSRB
via EMMA in each of the three advance refunding offerings in which Huntington
acted as the sole or senior underwriter.
Third, even after Huntington had been notified that it was not properly
filing required documents relating to advance refunding offerings, Huntington
continued violating MSRB rules by not filing three advance refunding documents
with the MSRB and filing another five advance refunding offerings late
by an average of 14 days.
Fourth, Huntington's policies and procedures were deficient because,
although they described in part Huntington's responsibilities with
regard to MSRB filings and customer disclosures, they failed to provide
an adequate system for ensuring that Huntington's responsibilities
were actually being met.
Fifth, and once again even after Huntington had been notified that its
policies and procedures were inadequate, Huntington nevertheless failed
to enforce its newly revised policies and procedures, resulting in continued
violations of MSRB Rule G-32.
Finally, Huntington violated MSRB Rule G-32 by failing to disclose four
political contributions made by executives at the brokerage firm. Three
of the political contributions totaled between $2,500 and $3,500, and
the fourth political contribution was for $1,000. The names of the executives
were not disclosed.
The AWC notes this is not the first time that Huntington has been sanctioned
for violating MSRB rules. In October 2008, Huntington accepted a $6,000
fine and censure for failing to properly report purchases and sales of
municipal securities through the MSRB's Real-time Transaction Reporting