FINRA Fines Frazer Lanier $125K for Political Contribution Violations
The Financial Industry Regulatory Authority has censured and fined municipal securities dealer Frazer Lanier Company, Incorporated, $125,000 for failing to monitor their employees’ political contributions.
FINRA said that Municipal Securities Rulemaking Board, or MSRB, Rule G-37(b) allows municipal finance professionals, or MFPs, to make political contributions as long as such contributions do not exceed $250 per MFP to each official per election. Prior to March 2020, however, Frazer Lanier had no system to aggregate employee political contributions and thereby track how much an employee donated to a given candidate during a primary or general election. Because of this, the firm failed to detect a $500 political contribution, reported as two separate $250 contributions, by a firm MFP in May 2018. FINRA also said that the firm did not require documentary evidence for its employees’ political contributions.
Additionally, FINRA reported that during the period from January 2018 through the present, Frazer Lanier was a dues-paying member of a nonprofit organization that contributed to and endorsed political candidates through the organization’s affiliated political action committee. Frazer Lanier employees held leadership positions within the nonprofit organization, and one of Frazer Lanier’s MFPs served in a leadership position with the organization’s affiliated PAC. The firm was aware that the nonprofit organization engaged in political activities and contributed to political candidates through the PAC.
The firm, however, did not have a system to monitor the PAC’s endorsements or contributions to political candidates, including to detect whether the PAC made any contributions to officials of municipal entities with dealer selection influence. Although the firm obtained letters from the nonprofit organization stating that the firm’s membership dues would not be used to make political contributions or payments, the firm had no written standard procedures restricting the use of its membership dues or providing any mechanism to ensure that its membership dues would not be used to make prohibited political contributions or payments. This, FINRA said, further violated MSRB Rule G-37.
MSRB Rule G-37 prohibits municipal dealers and their associated persons from making or coordinating political contributions to issuer officials with dealer selection influence. The rule is designed to prevent pay-to-play practices in the municipal securities market.
Frazer Lanier consented to the censure and fine without admitting or denying the findings.
The Frazer Lanier Company is headquartered in Montgomery, Ala. and has 15 registered individuals located in three branch offices. Municipal securities underwriting is one of Frazer Lanier’s principal lines of business.
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