Rodman & Renshaw fined $315,000 for information barrier violations

By Angela McDaniels

Tacoma, Wash., Aug. 22 - The Financial Industry Regulatory Authority fined Rodman & Renshaw LLC $315,000 for supervisory and other violations and sanctioned the company's former chief compliance officer and two research analysts, according to a Finra news release.

Rodman, the New York-based broker-dealer subsidiary of Direct Markets Holdings Corp., provides investment banking services, including private investments in public entities and registered direct offerings, to public and private companies. It also provides research, sales and trading services to institutional investors.

According to Finra, Rodman failed to have an adequate supervisory system to monitor interactions between its investment banking and research functions from January 2008 to March 2012. Finra said that as a result, Rodman failed to prevent research analysts from soliciting investment banking business.

In addition, the firm compensated a research analyst for his contribution to the firm's investment banking business and failed to prevent Rodman's chief executive officer, a member of the firm's research analyst compensation committee while simultaneously engaged in investment banking activities, from having influence or control over research analysts' evaluations or compensation, according to the Finra release.

CCO, analysts sanctioned

Rodman's former chief compliance officer, William Iommi Sr., was fined $15,000, suspended from acting in a principal capacity for 90 days and must requalify as a general securities principal.

Analyst Lewis Fan was fined $10,000 and suspended for 30 business days for participating in efforts to solicit investment banking business from two public companies.

In March 2010, a Chinese company was choosing an investment bank for an upcoming offering.

In an intercompany e-mail obtained by Finra and quoted in its letter of acceptance, waiver and consent, Fan wrote that members of the Chinese company's management "want to divide their love into two: 10 dollars of popcorn for us and 10 dollars of soda for the other guy, on two separate movie dates [...but] their CEO was leaning towards giving his whole love to the other guy. [...] If we want to even have 50 percent of the love, we've got to sweeten the pot."

Ultimately, Fan initiated research coverage of the company in April 2010 with a Market Outperform rating, and the company announced a $10 million registered direct offering in January 2011 for which Rodman was the exclusive placement agent, Finra said.

Alka Singh was fined $10,000 and suspended for six months after Finra found that she attempted to arrange a concealed fee from a public company for which she provided research coverage.

According to the Finra letter of acceptance, waiver and consent, in an e-mail to the CEO of the public company, Singh wrote, "When companies like the analyst covering the stock but don't have a strong relationship with the bankers or the firm - they have concealed the fees as a consulting fee or banking fee so that the analyst can get at least something for their effort."

In concluding this settlement, Rodman, Iommi, Fan and Singh neither admitted nor denied the charges, but they consented to the entry of Finra's findings.

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