Securities regulator fines Zions Bancorp unit $225,000 over alleged disclosure failure

FINRA fines Zions Bancorp unit $225,000

WASHINGTON — A securities industry regulator on Wednesday fined a Zions Bancorp unit $225,000 for failing to disclose a potential conflict of interest in online auctions of certificates of deposit.

Zions Direct began auctioning CDs through its website in February 2007, allowing retail investors to place online bids to purchase CDs issued by banks. But the Financial Industry Regulatory Authority said Zions Direct failed to disclose that an affiliate, Liquid Asset Management, also participated prior to November 2008.

FINRA found that the closing CD yields that winning bidders received in some of the auctions might have been higher had Liquid Asset Management not participated. Liquid Asset’s involvement also may have benefited CD-issuing banks affiliated with Zions. Those banks might have paid higher yields on the CDs purchased through the auctions, had Liquid Asset not taken part, FINRA said.

James Shorris, FINRA’s acting enforcement chief, said that information about Liquid Assets’ participation in the auctions “was material information, and a potential conflict of interest, that should have been disclosed” to customers and prospective customers.

FINRA also found that Zions Direct sent customers advertisements about its auctions that contained misleading statements and exaggerated claims involving the yields that bidders could obtain on CDs.

In concluding the settlement, Zions Direct neither admitted nor denied FINRA’s allegations, but consented to the findings, FINRA said.

Zions Bancorp spokesman James Abbott said the company believes it has now corrected its disclosures to comply with FINRA’s standards.

Zions Bank is a unit of Zions Bancorp, a Salt Lake City-based bank holding company. Shares of Zions Bancorp fell 18 cents to $18.14 in afternoon trading.