Securities Litigation

FINRA issued its late-July Regulatory Notice 15-27 warning brokerage firms that inadvertent short positions or fail-to-delivers in municipal securities trading can create situations where the member-firm pays a customer substitute interest that is not tax-deductible. Firms need to ensure their supervisory and compliance systems, and just as importantly their customer communications, address those situations. Short sales of municipal securities (selling a borrowed position, and buying it in lower, later) are rare. But the IRS has held that the lender's receipt of interest ...