Jefferies LLC has agreed to pay a $37,200 fine as part of a settlement with the Financial Industry Regulatory Authority (FINRA) over violations of supervisory requirements under Regulation M. The violations occurred between January 2018 and September 2022, when Jefferies’s supervisory system, including its written supervisory procedures (WSPs), failed to ensure compliance with Regulation M and related notification rules.

Jefferies LLC Settlement with FINRA, Agrees to Pay Fine

Regulation M, established under the Securities Exchange Act of 1934, prohibits underwriters, broker-dealers, and other distribution participants from bidding for or purchasing covered securities during the restricted period of an offering. This is going to prevent manipulation of the securities market by artificially stimulating demand or inflating the price of an offering.

Jefferies’s WSPs acknowledged the requirements of Regulation M, but they did not adequately outline the necessary steps to ensure compliance, such as supervisory reviews to verify the accuracy of restricted periods and confirm that no impermissible trading occurred. The firm failed to conduct these reviews during the relevant period, resulting in an inability to identify whether it had purchased shares in covered securities during restricted periods.

As a consequence, Jefferies violated FINRA Rules 3110(a) and (b) in 2010, which govern supervision and ethical conduct in the securities industry. In addition to the fine, the firm has agreed to a censure.

This settlement is part of a broader resolution involving similar cases, with a total fine of $250,000. The matters were brought by several major exchanges, including Investors Exchange LLC, Nasdaq Stock Market LLC, and the New York Stock Exchange LLC, among others.

Jefferies LLC’s settlement with FINRA highlights the critical importance of maintaining robust supervisory systems to ensure compliance with regulatory requirements, particularly under Regulation M. The firm’s failure to implement adequate controls and reviews during the restricted periods of securities offerings led to violations, resulting in a $37,200 fine and a censure.

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