Former securities representative suspended and fined for allegedly making unsuitable investment recommendations
In addition order tickets for 150 solicited sale transactions were marked as “unsolicited”, resulting in the firm failing to maintain accurate books and records. A restitutionary payment of $129,496 plus interest has been ordered.
FINRA Rule 2010 FINRA Rule 4511
Former securities representative suspended and fined for allegedly making false entries in an account management system
FINRA Rule 2010
Former securities representative barred for allegedly refusing to produce documents and information
FINRA Rule 2010 FINRA Rule 8210
Former senior analyst suspended and fined for allegedly failing to disclose felonies on Form U4
FINRA By-Laws Article V, Section 2 FINRA Rule 1122 FINRA Rule 2010
Former securities representative barred for allegedly refusing to produce documents and information
FINRA Rule 2010 FINRA Rule 8210
Former securities principal barred for allegedly refusing to provide on-the-record testimony
FINRA Rule 2010 FINRA Rule 8210
Former products principal suspended and fined for allegedly participating in private security transactions without firm approval
FINRA Rules 2010 FINRA Rules 3280
Former securities representative suspended for alleged excessive and unsuitable trading in a customer’s account
FINRA Rule 2010 FINRA Rule 2111
Securities representative suspended and fined for allegedly making unsuitable investment recommendations
Unsuitable use of margin was recommended in accounts of two customers who were not sophisticated investors resulting in sizeable trading losses. A restitutionary payment of $33,374.31 plus interest has also been ordered as a result.
FINRA Rule 2010 FINRA Rule 2111
Former compliance officer suspended and fined for allegedly failing to establish and implement an adequate AML compliance program
The compliance officer’s alleged failure to develop and implement a reasonable AML program as well as a Customer Identification Program (CIP) led directly to the firm’s failure to investigate and respond to multiple red flags indicating potential market manipulation on the part of pre-IPO issuers based in China as well as an issuer based in the US whose founder and former CEO had a disciplinary history and so should have also been designated ‘higher risk’.
AML procedures for trade monitoring and the detection of suspicious activity, including market manipulation, were also inadequate during this time period. Manual trade reviews were conducted by the compliance officer as well as his subordinates, but these did not “facilitate detection of suspicious trading patterns across time or among multiple customers”. Had the procedures been adequate suspicious trading patterns, which suggested coordinated activity to manipulate IPO stock prices would have been uncovered and could have been investigated.
In addition the compliance officer was designated as the principal responsible for the establishment, maintenance and enforcement of a supervisory system designed to ensure the firm’s compliance with rules regulating the sale of unregistered securities. As a result of his failure to do so “the firm effected multiple liquidations of restricted securities without reasonable inquiry, despite red flags”. In particular, information or documentation regarding the acquisition of shares, holding period, or affiliate status of the acquirers was not collected or reviewed, nor was independent analysis undertaken in order to ensure that the shares in question “were eligible for public resale through any safe harbor or exemption”.
FINRA Regulatory Notice 09-05 FINRA Rule 2010 FINRA Rule 3110 FINRA Rule 3310 Securities Act Rule 144 Securities Act Section 5
FINRA Hearing Panel order bars former compliance director for allegedly providing false and misleading responses and an altered document to FINRA
The compliance director was one of the firm’s AMLCOs with primary responsibility for the firm’s AML program. In line with firm policy her husband and brother had brokerage accounts at the firm. Although they were not the only firm customers who traded low-priced securities (LPS), they were active traders in these securities. Despite the firm’s auditors recommending improvements to the AML program, its deficiencies, particularly in connection with LPS trading were not addressed by the AMLCO. The panel also found that as the AMLCO the compliance director did not investigate potentially suspicious trading activities conducted by her husband, her brother as well as the small number of other customers trading in LPS.
The LPS trading by her husband attracted the attention of FINRA and three Rule 8210 requests were sent to her by FINRA’s Office of Fraud Detection and Market Intelligence. In response, the compliance director provided some relevant information to FINRA, but did so in a way that suggested that she had obtained the documents from the firm’s existing due diligence files, while instead they were sent to her, at her request, by her husband, who was the subject of the FINRA investigation. The compliance director also altered one of the documents in order to remove a footer showing the date, which was material, on which it had been printed from the EDGAR system.
While the panel found that the compliance director failed to adopt and implement a reasonable AML program and investigate suspicious activity, the sanctions for these failures, which included aggravating considerations, were not imposed because of the bar for the failure to respond truthfully to FINRA requests, compounded by what the panel held was the intentional misleading of FINRA, which was deemed evidence of a lack of integrity and ability to comply with regulatory rules.
A panellist dissented from the panel’s finding that the compliance director was guilty of misleading FINRA or obstructing the investigation suggesting that this finding was not supported by the preponderance of the evidence presented during the hearing.
(Note that this is an Extended Hearing Panel Decision and not an AWC)
FINRA Rule 2010 FINRA Rule 3310 FINRA Rule 8210
| Unless otherwise noted all respondents accepted and consented to FINRA’s findings without admitting or denying them. |