MDB Capital censured and fined for alleged supervisory system shortcomings
The firm’s written supervisory procedures prohibited certain trading practices, but did not address all relevant potential conflicts arising from the firm’s representation of start-up companies issuing stock traded by firm representatives and customers.
Surveillance of trading at the firm relied on a manual review of a daily trade blotter which did not clearly identify trades that could be subject to conflicts of interest. The reviews by a firm supervisor were ad hoc, not guided by any written criteria and remained undocumented.
The firm’s supervisory system also failed to reasonably address the potential misuse of material non-public information where firm representatives served on the boards of start-up companies.
The firm has agreed to the imposition of an undertaking requiring it to certify in writing the remediation of the issues identified.
FINRA Rule 2010
FINRA Rule 3110
Wells Fargo Clearing Services censured and fined for allegedly failing to safeguard customer information
Some registered representatives retained access to customer records because the firm failed to notify some insurance carriers of their departure from the firm.
The firm had notified insurance carriers of the departure of representatives selling products to customers, which it designated as “producing”. These representatives had access to customer information, specifically their variable annuity accounts, through the portals provided and managed by the insurance carriers.
The firm miscategorized some of these representatives as “non-producing”, which meant that it did not notify the insurance carriers that they had left the firm as was standard practice.
This, in turn, led to the representatives retaining access to the non-public personal information of customers following their departure from the firm.
FINRA Rule 2010
FINRA Rule 3110
NASD Rule 3010
SEC Reg S-P Rule 30
Securities representative barred for refusing to appear for on-the-record testimony
FINRA Rule 2010
FINRA Rule 8210
Securities representative suspended and fined for allegedly making unsuitable investment recommendations
FINRA Rule 2010
FINRA Rule 2111
Securities representative suspended and fined for allegedly making unsuitable investment recommendations
FINRA Rule 2010
FINRA Rule 2111
Former securities principal suspended and fined for allegedly failing to reasonably supervise the sales of two illiquid investments
The principal was aware of, but failed to reasonably investigate and respond to, red flags of potentially unsuitable investment recommendations to customers.
Instead of investigating the red flags the principal approved such sales without any further inquiry.
FINRA Rule 2010
FINRA Rule 3110
David Lerner Associates censured for alleged suitability rule shortcomings in connection with illiquid products
The sales involved two limited partnerships that were illiquid and with no guaranteed liquidity event. More than 6,000 of the firm’s customers invested in the partnerships.
During the time that the partnerships were being sold, the firm became aware of red flags suggesting that the investment was being recommended to customers for whom it could potentially be unsuitable.
The firm failed to reasonably investigate those red flags.
In addition the firm’s supervisory system was not reasonably designed to:
- Consider customer age in its suitability analysis; and
- Verify the accuracy of updates to customer investment profiles or subject these to a supervisory review.
As a result the firm’s representative were able to make more than 120 unsuitable sales to customers who were aged 76 or older and whose investment profiles were updated at the same time as the recommendations in order for them to meet the eligibility criteria specified in the firm’s WSPs.
A restitutionary payment of $1,002,566.16 has been ordered and the firm has been suspended from selling illiquid, proprietary products. The firm will be able to engage in this line of business, subject to fulfilling certain requirements, after two years.
FINRA Rule 2010
FINRA Rule 2111
FINRA Rule 3110
Calton & Associates censured and fined for allegedly failing to disclose required mark-up and mark-down information on retail customer confirmations
Approximately 250 trade confirmations for municipal securities transactions and 150 corporate and agency debt transactions lacked the information required under FINRA and MSRB rules.
The firm also failed to report the correct time of trade or execution for some transactions when reporting these to TRACE and RTRS.
Finally, the firm’s supervisory system was not reasonably designed to:
- ensure that mark-up and mark-down information was reviewed and was accurate; and
- review the accuracy of its RTRS and TRACE reports with respect to time of execution.
FINRA Rule 2010
FINRA Rule 2232
FINRA Rule 3110
FINRA Rule 6730
MSRB Rule G-14
MRSB Rule G-15
MSRB Rule G-27
Former securities representative suspended and fined for allegedly accepting a bequest from the estate of a customer without notice to or approval
The customer was not an immediate family member.
FINRA Rule 2010
FINRA Rule 3241
AAG Capital censured and fined for alleged Reg BI shortcomings
The firms WSPs and supervisory procedures were not reasonably trailed to address recommendations of a complex product that comprised a significant component of its revenue and the entirety of its annuity business.
The WSPs failed to reasonably describe the steps that supervisors were required to take to evaluate whether registered representatives had a reasonable basis to believe the recommendations for this product were in the best interests of the customers.
In particular the firm failed to reasonably consider the various disadvantages of exchanging insurance policies, fixed index annuities, and variable annuities for the product. As a result:
- six customers gave up life insurance policies with a death benefit valued more than the surrender value of the contract;
- fifteen customers relinquished fixed or variable annuities with optional death benefit riders or living benefit riders, some of which had accrued value exceeding the contract value;
- eight customers incurred surrender charges as a result of the exchange.
Because the documentation connected to these exchanges did not contain adequate information supervisors were unable to reasonably assess whether the exchanges were in the best interest of the customers in question.
FINRA Rule 2010
FINRA Rule 3110
SEA 1934 Rule 15l-1
SEC Reg BI
| Unless otherwise noted all respondents accepted and consented to FINRA’s findings without admitting or denying them. |