BD to Pay $1 Million Fine for Paying Finder that Didn’t Perform Services
FINRA has fined a large broker-dealer $1 Million for, in part, paying a finder that provided no services in connection with stock loan transactions. According to FINRA, firms are permitted to pay finders to assist “borrowers in locating securities, especially hard-to-borrow stocks.” However, firms are not permitted to make “unjustified payments to finders who provided no service.”
OUR TAKE: FINRA did not cite a violation of any particular law or rule. Presumably, this type of action extends FINRA’s long-standing objection to interpositioning whereby a firm receives payment without performing some type of service other than simply making introductions. FINRA, along with the SEC, has been taking action against solicitors and their clients where the arrangement does not involve some type of service being provided.