Rodman & Renshaw Fined $315,000 by FINRA

Research analysts solicited investment banking business and attempted to arrange a payment from a public company, according to FINRA charges against Rodman & Renshaw LLC. The firm was fined for supervisory and other violations related to the interaction between the firm’s research and investment banking functions.

Rodman’s former CCO, William A. Iommi Sr., was fined $15,000, suspended from acting in a principal capacity for 90 days and must requalify as a general securities principal. FINRA found the firm’s supervisory system was deficient.

FINRA sanctioned two research analysts involved; Lewis B. Fan was fined $10,000 and suspended for 30 business days for violating NASD Rule 2711 by participating in efforts to solicit investment banking business from two public companies, and Alka Singh was fined $10,000 and suspended for six months after FINRA found that she attempted to arrange a concealed fee from a public company for which she provided research coverage.

Rodman, the New York-based broker-dealer subsidiary of Direct Markets Holdings Corp., provides investment banking services, including Private Investments in Public Entities (PIPEs) and registered direct offerings, to public and private companies. It also provides research, sales and trading services to institutional investors and therefore must have supervisory and compliance procedures to monitor potential conflicts of interest between research and investment banking, given concerns that research analysts could be pressured to tailor their coverage to the interests of a firm’s current or prospective investment banking clients.

FINRA found that from January 2008 to March 2012, Rodman failed to have an adequate supervisory system to monitor interactions between its investment banking and research functions. As a result, Rodman failed to prevent research analysts from soliciting investment banking business. In addition, the firm compensated a research analyst for his contribution to the firm’s investment banking business and failed to prevent Rodman’s CEO, a member of the firm’s Research Analyst Compensation Committee while simultaneously engaged in investment banking activities, from having influence or control over research analysts’ evaluations or compensation.

Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, “The deficiencies in Rodman’s supervisory system created an environment in which the conflict of interest between research and investment banking was left unmanaged. FINRA will continue to ensure that firms have adequate supervisory systems tailored to the firm’s business and we will continue to sanction firms that demonstrate a weak culture of compliance and internal controls.”

In concluding this settlement, Rodman, Iommi, Fan and Singh neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

Fort Lauderdale Securities Litigation Attorney and FINRA Arbitrator

Contact Fort Lauderdale securities litigation attorney Howard N. Kahn, Esq. if you or someone you know has a securities or broker dispute. In addition to being an experienced securities litigation attorney, Mr. Kahn also serves as a FINRA arbitrator for individual investors, brokers, and brokerage firms. You can reach him at 954-321-0176 or online.