According to FINRA, Drexel Hamilton, LLC and four of its representatives were sanctioned for submitting fraudulent retail orders for municipal bonds.

The firm was censured, fined $300,000, and ordered to pay disgorgement of $837,353. Individual representatives received varying sanctions: Michael Ivcic was fined $30,000 and suspended for 15 months; Thomas Mead Jr. received a deferred fine of $15,000 and a six-month suspension in principal capacity; Frederick Phelan was fined $20,000 with a four-month suspension; and David Steigerwald was fined $30,000 with a six-month suspension.

The investigation revealed that on at least 572 occasions, the firm submitted orders designated as retail without a legitimate basis, using fake zip codes to make the orders appear as though they came from genuine retail customers. Additionally, on at least 44 occasions, orders exceeding the $1 million maximum were split into smaller orders to evade eligibility requirements.

Ivcic personally submitted 276 fraudulent retail orders with fake zip codes and split at least 29 oversized orders. Phelan and Steigerwald submitted 46 and 127 false orders respectively. Mead, as department head, failed to respond to red flags when a syndicate manager challenged numerous orders that did not appear to be for genuine retail customers.

This case highlights the importance of regulatory oversight in municipal bond markets. Retail order periods exist to give individual investors priority access to new bond issues. When firms circumvent these rules, they harm both the integrity of the market and individual investors who should have had first access to these securities.