← Broker database 2024-07-26
The Jeffrey Matthews Financial Group Ordered to Pay $112,932 in Restitution for Unfair Bond Pricing
According to FINRA, The Jeffrey Matthews Financial Group, L.L.C. was censured, fined $125,000, and ordered to pay $112,932.02 plus interest in restitution to customers on July 26, 2024, for charging unfair prices in corporate and municipal bond transactions.
The firm failed to consider the appropriate pricing information, as identified in FINRA and MSRB rules, to determine the prevailing market price. Instead, when selling to customers, the firm in all cases used its own cost to determine the prevailing market price, even when its cost was not contemporaneous. When purchasing from customers, the firm in all cases used inter-dealer bid or offer quotations to determine the prevailing market price. This improper methodology caused customers to pay $112,932.02 in excess costs.
The firm also failed to establish, maintain, and enforce a supervisory system reasonably designed to achieve compliance with fair pricing rules. The firm's supervisory reviews of prices focused only on the size of mark-up and mark-down percentages, and the firm did not have any system to determine the appropriateness of the prevailing market price to which those mark-up and mark-down percentages applied.
This case highlights the importance of fair pricing in bond transactions. FINRA and MSRB rules require firms to charge prices that are fair, taking into consideration all relevant factors including the prevailing market price. Firms must use appropriate contemporaneous pricing information to determine prevailing market prices. Investors should understand that they have a right to fair pricing on bond transactions and should question prices that seem unreasonable compared to recent market activity. The firm was required to certify that it has remediated these issues and implemented a reasonably designed supervisory system.