Stock Loan Diciplinary Action

FINRA Fines Raymond James, RBC CapitalMarkets Corporation, Stock
Loan Trader for Improper Stock Loan Practices
Firms Pay Total of $1.4Million for Stock Loan Improprieties, Supervisory Deficiencies,
Trader Suspended and Fined
The Financial Industry Regulatory Authority (FINRA) announced that as part of its
in-depth investigation of stock loan practices in the industry, it has imposed a fine of
$1million against Raymond James & Associates, Inc. of St. Petersburg, FL, and a fine of
$400,000 against RBC CapitalMarkets Corporation of NewYork, for various stock loan
improprieties.
Raymond James was sanctioned formaking unjustified and improper payments to
finder firms that provided no service in locating securities or had no involvement in the
stock loan transaction for which they were paid. Raymond James and RBCCMC were
both fined for using a non-registered individual, who had been convicted in federal
court of securities law violations and had been barred fromthe securities industry by
the Securities and Exchange Commission (SEC), to performstock loan functions
requiring registration.
Benedict Patrick Tommasino, the head trader of RBCCMC’s Stock Loan Department was
was suspended for 20months fromworking for a securities firmin any capacity, was
suspended an additional twomonths fromacting in a principal capacity and was fined
$30,000 for his role in themisconduct.
“Finders for stock loan transactions can play an important role in themarkets by
assisting borrowers in locating securities, especially hard-to-borrow stocks,” said Susan
Merrill, FINRA Executive Vice President and Chief of Enforcement. “But Raymond James
tradersmade unjustified payments to finders who provided no service.Moreover, both
firms exposed themarket to the activities of an unqualified and unsupervised
individual by allowing a non-registered person who had been barred fromthe securities
industry to performstock loan functions.”
During 2004, Raymond James, on various occasions paid finders in connection with
stock loan transactions when there was no apparent justification for the finder
payments.

For example, a review of stock loan transactions on four days inMarch and April 2004
revealed 11 transactions for which two finder firms were paid despite having
performed no service, including one finder firmwhere a Raymond James stock loan
trader’s son was an employee. In addition, Raymond James’s books and records
inaccurately reflected that a finder had provided services in connection with certain
stock loan transactions in exchange for payment when, in fact, the purported finder
had not performed any function.
In 2004, Raymond James and RBCCMC each allowed Dennis Palmeri, Sr. of Shields
Institutional, a non-registered finder, to performstock loan functions requiring
registration. In February 1994, Palmeri was convicted in federal court of aiding and
abetting his then-employer’s violation of federal securities laws. The SEC then barred
Palmeri fromworking for any broker dealer, investment advisor or investment company.
The bar did not preclude Palmeri fromacting as a non-registered finder, but does
preclude himfromperforming functions requiring registration.
FINRA further found that these activities occurred because Raymond James and
RBCCMC each failed to reasonably supervise the activities of their respective Stock
Loan Departments.
In concluding these settlements, neither Raymond James, RBCCMC nor Tommasino
admitted nor denied the charges, but consented to the entry of FINRA’s findings.

http://www.finra.org/web/groups/industry/@ip/@enf/@da/documents/disciplinaryactions/p119808.pdf