FINRA Slaps $43.5 Mln Fine On Ten Financial Firms Over Toys 'R' Us IPO Research

(RTTNews) - The Financial Industry Regulatory Authority or FINRA, announced Thursday a total fine of $43.5 million to be paid by ten financial firms related to the favorable research coverage provided by them for the proposed Toys 'R' Us, Inc. initial public offering in 2010. Each of the firms will pay a fine ranging between $2.5 million and $5 million.

Susan Axelrod, FINRA Executive Vice President, Regulatory Operations, said, "FINRA's research analyst conflict of interest rules make clear that firms may not use research analysts or the promise of offering favorable research to win investment banking business. Each of these firms used their analyst to solicit investment banking business from Toys"R"Us and offered favorable research."

The firms are charged by the FINRA of allowing their equity research analysts to solicit investment banking business and for offering favorable research coverage in connection with the Toys 'R' Us IPO.

Barclays Capital Inc. (BCS), Citigroup Global Markets Inc.(C), Credit Suisse Securities (USA), LLC (CS), Goldman, Sachs & Co. (GS), and JP Morgan Securities LLC (JPM) were fined $5 million each.

Five of these and Needham & Co., LLC, which was only fined $2.5 million, were found to have inadequate supervisory procedures related to research analyst participation in investment banking pitches.

Meanwhile, Deutsche Bank Securities Inc. (DB), Merrill Lynch, Pierce, Fenner & Smith Inc., Morgan Stanley & Co., LLC (MS) and Wells Fargo Securities, LLC (WFC) were each fined $4 million.

The New Jersey-based retailer was taken private in 2005 by a consortium including private equity-firms Bain Capital LLC, Kohlberg Kravis Roberts & Co. (KKR) and Vornado Realty Trust in a $6.6 billion leveraged buyout.

Toys 'R' Us owners then initially filed with the U.S. Securities and Exchange Commission for an $800 million IPO in May 2010, but eventually withdrew the plan for the IPO in 2013. Meanwhile, the ten fined financial firms were invited and offered different roles for the offering.