Zions Direct, the broker-dealer subsidiary of Zions Bank, has been fined by the industry's private regulators for failing to disclose potential conflicts of interest associated with its auctions of certificates of deposits (CDs).

The Financial Industry Regulatory Authority (FINRA) said Wednesday it fined Zions Direct $225,000 because it didn't tell investors taking part in some of its online CD auctions that an affiliate company, Liquid Asset Management, was also a bidder.

FINRA examiners discovered the failure to disclose the conflict during a routine audit of the auction, spokesman Brendan Intindola said.

"The violation has to do with … the fact that retail investors should have the information that the affiliate was in the auction at the same time as [other] customers, because it meant that the closing [CD] yields may have been higher if the affiliate had not participated," Intindola said in an e-mail.

James Abbott, who handles investor relations for Zions Bancorp, said Zions Direct has agreed to pay the fine without admitting or denying the examiners' findings.

"We believe that we have now corrected these disclosures to meet FINRA's standards," Abbott said.

Liquid Asset Management is a department inside Zions Bank. It provides money management services to corporate clients, governments and not-for-profit organizations.

FINRA said Zions Direct began auctioning CDs through its website in February 2007. The violations allegedly continued until November 2008.

Intindola said FINRA can't say how much the CD rates may have been suppressed by Liquid Asset Management's bidding during the auctions.

Because the potential interest rates may have been higher if Liquid Asset Management hadn't taken part, it was also possible that the Zions Bancorp subsidiaries that were issuing the CDs were able to pay lower interest rates on the CDs that were purchased, according to FINRA.

FINRA also said Zions Direct used misleading and exaggerated language in advertisements to potential customers.

Abbott would not say whether the violations resulted from oversights at Zions Direct. He declined to discuss FINRA's allegations, citing terms of an agreement between the company and regulators.

Abbott said Zions Direct has had a clean record in the past.

pbeebe@sltrib.com