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For the second time in less than a week, Zions Bancorp is grappling with a fine imposed by regulators on one of its financial services business units.
Liquid Asset Management, a money-management department inside Zions Bank, was fined $50,000 on Aug. 26 for conducting business without proper licenses, Utah Securities Division Director Keith Woodwell said Thursday.
LAM also ran afoul of Woodwell's office for making false statements. One of LAM's principal officers applied for a certified investment-adviser license on behalf of another Zions unit, Contango Capital Advisors, without the knowledge or permission of Contango, Woodwell said.
Woodwell declined to name the executive. LAM is headed by C. Richard Schwarz, a senior vice president.
Two days earlier, on Aug. 24, the Financial Industry Regulatory Authority fined Zions Direct, the broker-dealer subsidiary of Zions Bank, $225,000. It didn't tell investors taking part in some of its online certificate-of-deposit auctions that LAM was also a bidder.
LAM was also involved in the fine, Woodwell said.
James Abbott, senior vice president in charge of Zions' investor relations, said the missteps resulted from clerical oversights that don't add up to a pattern of willful misbehavior.
"While it's disappointing, we work very hard to maintain a culture of compliance and are very careful," Abbott said.
The effect of LAM's behind-the-scenes bidding may have had the effect of keeping interest rates artificially low on CDs investors bought from Zions Direct. That could have saved the company money at the expense of its customers, FINRA said at the time.
Under a 1995 state law, LAM needed a certified investment-adviser license, to do business with government treasurers in Utah.
"We are not alleging that money was misappropriated or public treasuries were gouged. The business they did for treasurers was appropriate, the fees were reasonable and the investments were reasonable. All we are alleging is that it was done by an unlicensed entity," he said.
Woodwell wouldn't say whether LAM's actions were done on purpose. He would only say he has his own opinion, which he declined to share. Nor would Woodwell say whether the back-to-back fines by FINRA and his division were coincidental or part of a pattern.
"We've only looked at this one issue. But the fact that [another] unit was just fined by FINRA is evidence their compliance structure needs to be reviewed," he said.