Cantor Fitzgerald & Co has reached a settlement with the Financial Industry Regulatory Authority (FINRA) and will pay a fine of $73,000 due to multiple regulatory infractions. These violations occurred primarily between September 2017 and January 2022, where the firm failed to adhere to the timing and accuracy requirements set forth under Rule 104 of Regulation M and FINRA Rule 2010. Specifically, there were 12 instances of untimely notices related to syndicate covering transactions.
In addition to these infractions, between February 2017 and January 2022, the firm was also found to have submitted 75 untimely or incorrect notifications to FINRA concerning its involvement in security distributions that fell under Regulation M. This resulted in additional rule breaches under FINRA Regulations 5190 and 2010.
Furthermore, it was noted that from at least February 2017 until May 2024, the organization did not establish or maintain a supervisory system that adequately ensured compliance with the notification rules related to Regulation M. This lack of proper oversight led to violations of FINRA Rules 3110(a), 3110(b), and 2010.
Regulation M is crucial as it serves as the principal anti-manipulation framework enforced by the Securities and Exchange Commission (SEC). Its purpose is to prevent manipulative practices during the distribution of covered securities. Under Rule 101 of Regulation M, participants in a distribution, such as underwriters and broker-dealers, are explicitly prohibited from engaging in certain activities that could influence the price of securities during specified restricted periods before offering prices are established.
The restricted periods can vary depending on the type of security; they typically start one to five business days before the determination of the offering price. When a firm becomes involved in a distribution, the restrictions apply immediately if they are already in effect.
This settlement and fine highlight the importance of regulatory compliance within the financial sector, particularly in maintaining fair market practices and transparency in securities trading. FINRA continues to monitor organizations to ensure adherence to established rules designed to protect the integrity of the markets and investors alike.