May 7, 2024 – An AWC was issued in which the firm was censured and fined $500,000. Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to reasonably supervise transactions that its registered representatives placed directly with product sponsors on behalf of firm customers (i.e., direct business transactions or held away securities transactions). The findings stated that the firm did not take steps reasonably designed to ensure that direct business transactions appeared on 5 Disciplinary and Other FINRA Actions July 2024 the firm’s daily trade blotter, causing the firm to fail to run transactions, including dividend reinvestments, for customers through exception reports used to identify potential sales practice violations, including potentially unsuitable transactions. The firm also failed to ensure that it collected information for customers’ investment profiles, such as the customers’ ages, investment time horizons, and liquidity needs, that was relevant for making certain suitability determinations. Subsequently, the firm revised its WSPs to prohibit direct transactions with mutual fund companies unless a corresponding account has been established at the firm. The firm also instituted procedures to verify that each direct business mutual fund transaction is housed in a firm account or, if not, to require representatives to promptly obtain a new account application and open an account for the customer. The firm also established progressive discipline measures if representatives failed to obtain new account applications. Ultimately, the firm began a retrospective review of its direct business transactions during the relevant period. That review involved identifying the direct business transactions that the firm failed to include on its trade blotter and reviewing the transactions according to the parameters used by the firm’s exception reporting system. The firm attempted to collect missing information about customers’ investment profiles. The suitability of certain of the transactions could not be determined because the firm was unable to collect complete information at the time of the retrospective review about customers’ investment profiles, including their investment time horizons or liquidity needs that would have been relevant at the time of the purchase. (FINRA Case #2017052438501).
Harmed investors can call (954) 693-7577 or email [email protected] to discuss their legal options. All consultations are free and confidential. Most cases are handled on a contingency fee basis, meaning that clients are not obligated to pay attorney fees unless money is recovered on their behalf.