The Financial Industry Regulatory Authority (FINRA) has fined SunTrust Robinson Humphrey and SunTrust Investment Services a total of $5 million for failing to disclose the risks of auction-rate securities when underwriting and selling them.
FINRA fined SunTrust RH $4.6 million for not disclosing the increased risk that auctions could fail, for sharing material non-public information, and for using sales materials that did not disclose ARS risks.
The firm also did not have adequate trading or supervisory procedures relating to the sale and marketing of the securities, FINRA said.
The self regulator fined SunTrust IS $400,000 for having deficient sales material, procedures and training.
The action concludes agreements in principle that FINRA previously announced in September 2008 and that were withdrawn in May 2009. SunTrust RH voluntarily repurchased about $381 million of ARS from customers, while SunTrust IS repurchased about $262 million, according to FINRA.
In addition, the firms will participate in a special FINRA-administered arbitration program for eligible investors to resolve investor claims for consequential damages, it said.