Odeon Capital Group faces $100,000 fine by FINRA for Reporting Violations
Overview of Odeon Capital Group LLC
Odeon Capital Group LLC, a so-called “leading” full-service boutique broker/dealer for institutional clients, boasts about its sales and trading, investment banking, and research services. Supposedly comprised of over 100 professionals, the company claims expertise in structured products, corporate securities, municipals, currencies, and treasuries.
The firm’s investment banking team, as they claim, is known for solving complex issues and delivering innovative solutions. Mathew Van Alstyne and Evan Schwartzberg founded this entity in 2008, conveniently based in the financial hub of New York, NY. The team, allegedly comprised of experienced professionals offering boutique-level service and industry expertise, claims to be dedicated to providing advice and execution on all fundamental value and catalyst-driven situations.
Client Eligibility Discrepancies at Odeon Capital Group LLC
The Odeon Capital Group LLC Customer Disclosure Brochure sets a lofty bar for potential clients, demanding a minimum account balance of $1,000,000 to access their investment management services. However, in a seeming contradiction, the same document reveals a more lenient stance, claiming adherence to FINRA Rule 2111 institutional suitability standards for those who wield a hefty $100 million in securities unrelated to the entity (or a relatively modest $10 million if they happen to be a broker-dealer). The discrepancy raises questions about consistency and transparency in the company’s client requirements.
Allegations
The company agreed to accept penalties and acknowledged that it failed to report trades to TRACE promptly. It also incorrectly categorized internal transfers as securitized product transactions when they weren’t reportable. The firm neither admitted nor denied the findings. The report stated that the firm’s delayed reporting constituted a consistent pattern without exceptional circumstances.
Additionally, it failed to promptly report trades to the MSRB’s RTRS and mistakenly labeled internal transfers as municipal securities transactions. The firm submitted these transfers thinking they were reportable, but it was a misunderstanding.
Most of the late reports were due to manual errors and a lack of timely amendments. The findings revealed that the firm’s supervisory system, including its written supervisory procedures (WSPs) for TRACE and MSRB reporting, was not adequately designed for compliance with FINRA and MSRB rules.
The WSPs lacked guidance on how supervisors should review and ensure timely reporting or address reporting issues. Furthermore, they did not provide instructions on preventing the reporting of internal transfers to TRACE or the RTRS.
The firm has since updated its procedures to address these issues in TRACE and MSRB reporting.
Further Details
Odeon Capital Group LLC agreed to pay a $100,000 fine to settle with the Financial Industry Regulatory Authority (FINRA) for several trade reporting violations.
From July 2016 to April 2018 and again from August 2021 to March 2022, Odeon Capital failed to report approximately 640 trades on time to the Trade Reporting and Compliance Engine (TRACE).
Additionally, from February 2017 to April 2018, they incorrectly reported about 130 internal transfers to TRACE as securitized product transactions, even though they weren’t reportable.
Delayed and incorrect MSRB reporting
From February 2017 to August 2019, Odeon Capital failed to report about 225 trades to the Municipal Securities Rulemaking Board’s (MSRB) Real-time Transaction Reporting System (RTRS).
From February 2017 to March 2021 and again from January 2022 to August 2022, they incorrectly reported approximately 3,250 internal transfers to the RTRS as municipal securities transactions, although they weren’t reportable.
From July 2016 to July 2022, Odeon Capital’s supervisory system, including its written supervisory procedures (WSPs), lacked the proper design to ensure compliance with TRACE and MSRB reporting rules. Due to these violations, Odeon Capital breached FINRA Rules 6730, 2010, 3110, and MSRB Rule G-14. Along with the $100,000 penalty, the firm also agreed to a censure.
Conclusion
In conclusion, Odeon Capital Group LLC, a full-service boutique broker/dealer, has faced regulatory scrutiny and financial penalties due to trade reporting violations. The company, founded in 2008, boasts a team of over 100 professionals offering services in sales and trading, investment banking, and research.
The discrepancies in client eligibility criteria, as outlined in their Customer Disclosure Brochure, raise concerns about transparency and consistency in their requirements. Despite setting a minimum account balance of $1,000,000 for investment management services, the document reveals a more lenient stance for clients with substantial securities holdings.
The regulatory issues primarily revolve around Odeon Capital’s failure to promptly report trades to TRACE and the MSRB, including the misclassification of internal transfers. The company agreed to a $100,000 fine and a censure by FINRA, acknowledging the reporting violations and the inadequacy of its supervisory systems and written procedures.
While the firm has since updated its procedures to address the issues, these regulatory actions highlight the importance of robust compliance measures in the financial industry. Odeon Capital’s experience underscores the need for brokers/dealers to maintain stringent reporting practices to ensure adherence to industry rules and regulations.
