DALLAS, March 22, 2011 /PRNewswire/ -- SWS Group, Inc. (NYSE: SWS) today announced that its principal broker-dealer subsidiary, Southwest Securities, Inc., (the "firm") has entered into a settlement with the Financial Industry Regulatory Authority (FINRA), resolving an investigation by FINRA of risk management of the firm's Clearing Services operation. FINRA is a self-regulatory organization that serves as Southwest Securities' primary regulator.
Under the terms of a Letter of Acceptance, Waiver and Consent, and without admitting or denying FINRA's findings, Southwest Securities consented to a censure and the entry of certain findings relating to risk management of correspondent clearing relationships and trading activity. There were no allegations of monetary harm to investors. Southwest Securities also agreed to pay a fine of $650,000, and to certain undertakings. The amount of the settlement has been provided for with reserves previously set aside by SWS Group.
The investigation was precipitated by a clearing correspondent's short sale of more than two million shares of stock, which, as previously reported, caused Southwest Securities to incur a pre-tax loss of $6.3 million for the quarter ended September 25, 2009, net of substantial equity that the correspondent had on deposit. Southwest Securities terminated its clearing relationship with the correspondent and took a charge for the receivable against its fiscal first quarter 2010 earnings.
"After notifying FINRA of this issue in 2009, we took significant remedial action including various improvements to our risk management procedures, and when FINRA subsequently commenced an investigation, SWS cooperated fully," said James H. Ross, SWS Group CEO. "We are pleased to have resolved this matter and will continue to focus our efforts on behalf of our shareholders, clients and employees."
SWS Group, Inc. is a Dallas-based company offering a broad range of investment and financial services through its subsidiaries. The company's common stock is listed and traded on the New York Stock Exchange under the symbol SWS. SWS Group, Inc. subsidiaries include Southwest Securities, Inc., a national clearing firm, registered investment adviser and registered broker-dealer; SWS Financial Services, Inc., a registered investment adviser and a registered broker-dealer serving independent securities brokers and their clients; and Southwest Securities, FSB, one of the largest community banks headquartered in the Dallas-Fort Worth metropolitan area.
This news release contains forward-looking statements. Readers are cautioned that any forward-looking statements, including those predicting or forecasting future events or results, which depend on future events for their accuracy, embody projections or assumptions, or express the intent, belief or current expectations of the company or management, are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially as a result of various factors, some of which are out of our control, including, but not limited to, volume of trading in securities, volatility of securities prices and interest rates, liquidity in capital and credit markets, availability of lines of credit, customer margin loan activity, creditworthiness of our correspondents and customers, demand for housing, general economic conditions, especially in Texas and New Mexico, changes in the commercial lending and regulatory environments and other factors discussed in our Annual Report on Form 10-K and in our other reports filed with and available from the Securities and Exchange Commission.
SOURCE SWS Group, Inc.