Iorio Altamirano LLP is investigating The GMS Group LLC (“GMS”) after the firm was censured and fined $90,000 for charging unfair and unreasonable prices to customers in 49 transactions involving below investment grade municipal bonds. As part of the AWC, GMS was also ordered to pay approximately $42,446 plus interest in restitution to customers.
If you have lost money with GMS, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account.
GMS and FINRA entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) on February 5, 2021, over the following findings:
- Between January 1, 2016, and June 30, 2018, GMS charged unfair and unreasonable mark-ups and mark-downs in 49 transactions. These transactions involved below investment grade municipal securities. The prices ranged from 3.0% to 5.85% above the prevailing market price of those securities.
- GMS failed to establish and maintain a supervisory system, including written supervisory procedures (WSPs), reasonably designed to achieve compliance with the firm’s municipal securities fair pricing obligations.
GMS is headquartered in East Hanover, New Jersey, and has been a FINRA member since July 1979. The firm is a full-service broker-dealer primarily involved in fixed income and equities sales, proprietary trading, and municipal securities underwriting. GMS employs 78 registered individuals and has eight branch offices.
FINRA AWC
From January 1, 2016, through June 30, 2018, GMS charged its customers prices that were not fair and reasonable in 49 below investment grade municipal bond transactions. The mark-ups and mark-downs charged by the firm were excessive and ranged from 3.0% to 5.85% above the prevailing market price.
GMS charged mark-ups in 19 instances, which resulted from the use of an average cost methodology to calculate the mark-ups instead of calculating the mark-ups based on the GMS’s contemporaneous cost. In other words, GMS calculated mark-ups based on the average price paid by the firm to acquire the same bonds in similar inter-dealer transactions instead of the firm’s contemporaneous cost.
In the remaining transactions, GMS charged mark-ups and mark-downs without reasonably considering the prevailing market price of the bonds based on the firm’s contemporaneous cost or proceeds.
During this period, GMS’s supervisory system did not provide for supervision reasonably designed to achieve compliance with Municipal Securities Rulemaking Board (MSRB) rules regarding fair pricing of municipal securities transactions. GMS’s supervisory system was not reasonably designed to determine when an average cost methodology was used or how firm supervisors should determine the prevailing market price for the bonds under such circumstances.
GMS consented to a total fine of $90,000, which included $60,000 for the fair pricing violations and $30,000 for the supervision violations. Additionally, it consented to revise its WSPs with respect to the areas subject to the FINRA AWC.
GMS was also ordered to pay approximately $42,446 plus interest in restitution to customers. Restitution is a remedy used to restore the “status quo ante” where the firm’s customers would otherwise unjustly suffer loss. A FINRA restitution order does not preclude investors from pursuing their own claims to seek restitution or other available remedies. Investors harmed by GMS’s supervisory failures may have a claim against the firm.
Our Firm
If you have lost money with GMS, contact New York securities arbitration lawyer Jorge Altamirano of Iorio Altamirano LLP at jorge@ia-law.com or toll-free at (855) 430-4010 for a free and confidential evaluation of your account.
Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. We pursue FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.