According to FINRA, David Charles Levine was fined $10,000 and suspended for one month for attempting to recoup sales representatives' selling concessions in the absence of a penalty bid applied to the entire syndicate.

Levine's member firm acted as lead underwriter or co-manager for three Initial Public Offerings (IPOs). In his roles as the firm's chief executive officer during one IPO and sales manager during the other two IPOs, Levine participated in announcing the terms of the offerings to the firm's sales force. He directed members of the firm's syndicate department to send launch emails to its sales force in connection with the IPOs, which included flipper policies.

Despite the absence of a syndicate penalty bid, Levine directed the firm's branch managers and sales representatives that the firm would be implementing a flipper policy. Under this policy, the firm would track sales of the new issue for 30 days following each offering and recoup selling concessions from representatives whose customers flipped shares during that time frame.

A penalty bid is a mechanism used in underwriting syndicates where the managing underwriter may reclaim selling concessions paid to syndicate members when securities they sold are subsequently sold (flipped) shortly after the offering. However, penalty bids must be applied consistently across the entire syndicate. Levine's approach of imposing a flipper policy only on his own firm's representatives, without a syndicate-wide penalty bid, violated FINRA rules.

Flipping refers to the practice of purchasing IPO shares and quickly selling them for a profit, often on the first day of trading. While flipping itself is not illegal, underwriters discourage it because excessive flipping can harm price stability in newly public companies. However, the methods used to discourage flipping must comply with securities regulations.

By imposing a flipper policy without a proper syndicate penalty bid, Levine attempted to recoup selling concessions in a manner that wasn't properly structured or disclosed. This created unfair treatment of the firm's representatives compared to how such policies should be implemented in underwriting syndicates.

For investors, this case illustrates the complex rules governing IPO distributions and underwriting practices. While investors might view IPOs as straightforward investment opportunities, there are extensive regulations governing how underwriters can structure compensation, discourage flipping, and implement penalty provisions. These rules exist to ensure fair treatment and proper disclosure. The suspension is in effect from June 21, 2022, through July 20, 2022.