Riedl First Securities Company censured and fined for allegedly charging unfair prices in bond transactions
The firm charged 10 customers unfair prices in 160 corporate bonds transactions in which the firm sold corporate bonds and then used the proceeds of the sale to purchase new corporate bonds on the same day.
The firm determined the mark-ups on purchases without considering the mark-downs on all the corresponding sales. The mark-ups and mark-downs “were not justified” by:
- market conditions;
- execution cost;
- the type or availability of security;
- the value of brokerage services rendered;
- any other relevant factor.
The firm also failed to establish and maintain a supervisory system reasonably designed to achieve compliance with fair pricing rules with no supervisory reviews for fair pricing in proceeds transactions undertaken.
A restitutionary payment of $102,181.97 has been ordered and the firm has agreed to the imposition of an undertaking requiring it to certify in writing the remediation of the issues identified.
FINRA Rule 2121
FINRA Rule 2121.02
MSRB Rule G-27
MSRB Rule G-30
Western International Securities censured and fined for allegedly failing to supervise for excessive and unsuitable trading
The firm’s supervisory system as well as surveillance of trade-blotters were not reasonably designed to detect excessive trading. No guidance for evaluating indicators of potentially excessive trading was provided to supervisors and the surveillance system did not allow the indicators to be incorporated into reviews of trades.
In addition:
- Supervisors were not required to take reasonable steps to respond to any excessive trading that they potentially identified and were only required to notify compliance staff of their observations.
- Compliance staff in turn sent activity letters to customers based on these notices and their review of exception reports.
- These exception reports were, however, also missing key indicators of excessive trading.
- No further action was taken if customers did not respond to activity letters even if the firm identified new red flags of potentially excessive trading (the firm’s practice was not to send more than one activity letter every six months).
- The activity letters did not provide customers with notice explaining concerns about trading in their account which meant that it was not clear if the customers had understood and knowingly accepted those risks.
- The firm failed to consistently enforce its activity letter procedures.
As a result of these problems the firm failed to reasonably review potentially excessive trading in approximately one hundred accounts including those connected to actual excessive trading by four of its former registered representatives.
A restitutionary payment of $1,057,632.70 has been ordered.
The firm has also agreed to the imposition of an undertaking requiring it to remediate the issues identified.
FINRA Rule 2010
FINRA Rule 2111
FINRA Rule 3110
J.P. Morgan Securities censured and fined for alleged intermarket sweep order issues
A migration to a new exchange trading platform resulted in increased message activity, which in turn resulted in order routing delays.
These delays led to the firm relying on outdated market data snapshots when routing orders to trading centers, resulting in the routing of 6,682 orders that were priced through other market centers’ protected quotations.
The firm’s supervisory system was not reasonably designed to comply with Regulation NMS. Order routing was reviewed for latency, but no procedures were in place to verify that the market data snapshots were accurate at the time of routing.
FINRA Rule 2010
FINRA Rule 3110
SEC Regulation NMS Rule 600
SEC Regulation NMS Rule 611
Former securities representative suspended and fined for allegedly improperly retaining nonpublic personal information of customers
The representative retained a notebook containing the personal information of 200 customers and disclosed it to the firm that he intended to join.
The information was then used to prepare new account forms and populate customer relationship software in anticipation of transferring these customers to the new firm.
FINRA Rule 2010
Former securities principal suspended and fined for allegedly false content submissions
The representative submitted 13 pieces of general market commentary content to FINRA to be evaluated for compliance with the relevant advertising standards.
The submissions were submitted under the CRD number of her firm, but the content was that of the clients of the representative’s own consulting firm.
FINRA Rule 2010
Product representative suspended and fined for allegedly falsely certifying that he had personally completed the continuing education required to hold an insurance license
Another person had completed 15 hours of insurance continuing education on his behalf.
FINRA Rule 2010
Former products representative suspended and fined for allegedly participating in an undisclosed outside business activity
Between 2018 and 2022 the representative served as a board member, CFO and treasurer of a Vermont corporation, but did not provide notice to his firm of this activity until April 2022.
In addition the representative also received 3.25m shares of its unregistered common stock to the representative, but this private security transaction was not reported to and did not receive approval from his firm.
FINRA Rule 2010
FINRA Rule 3280
SpeedTrader censured and fined for alleged compliance failings and potentially manipulative trading
The firm’s supervisory system for potentially manipulative trading was deemed unreasonable because:
- A third-party surveillance system’s default parameters were implemented without any tailoring to the firm’s specific business or operating model.
- One trader identification number for each customer account was assigned even where the account had more than one authorized trader.
- Alerts were closed without reasonable follow up and investigation of the underlying trading.
- The firm’s WSPs failed to provide reasonable guidance on how to review exception alerts and how to escalate these.
The firm also failed to establish, document and maintain reasonable market access controls and procedures including those connected to:
- financial risk management;
- customer credit threshold;
- customer credit controls.
The firm has agreed to an imposition of an undertaking requiring it to certify in writing the remediation of the issues identified.
FINRA Rule 2010
SEA 1934 Rule 15c3-5
Pershing censured and fined for allegedly distributing inaccurate information by way of its account statement and online access portals
A third-party vendor on whom the firm relies failed to provide updated interest rate information for at least 13,000 foreign variable rate securities, the firm’s own system reflected the initial interest rate as a result even if this had changed.
As a result of this issue the firm provided inaccurate interest rate information:
- on its online access portals;
- on at least 200,000 trade confirmations;
- on approximately one million customer account statements.
The firm did not have a reasonable system in place to supervise the accuracy of interest rate information stored within its system or the accuracy of outputs reliant on this system. The firm also ignored red flags suggesting that its interest rate information distributed to customers was incorrect. When customers flagged the inaccurate interest rates, these were amended on the master system, but the root cause of the problem was not investigated.
This interesting fact pattern is explored in a more detailed GRIP article.
FINRA Rule 2010
FINRA Rule 2231
FINRA Rule 3110
FINRA Rule 4511
NASD Rule 2340
SEA 1934 Rule 17a-3
Product representative suspended and fined for allegedly falsely certifying that she had personally completed the continuing education required to hold an insurance license
Another person had completed 15 hours of insurance continuing education on her behalf.
FINRA Rule 2010
Former securities representative barred for allegedly refusing to provide documents and information and appear for on-the-record testimony
FINRA Rule 2010
FINRA Rule 8210
HB Securities censured and fined for allegedly permitting a statutorily disqualified person to continue to associate with it
The individual in question was barred by FINRA from associating with a member firm in any capacity but, for example, exercised financial control over the firm including directing the firm’s operating budget and controlling its net capital.
The firm’s indirect owner has also been suspended and fined for permitting this continuing association and also for allegedly acting in a principal capacity for the firm without being registered with FINRA.
The firm has agreed to the imposition of a notice requiring it to certify in writing the remediation of the issues identified.
FINRA By-Laws Art III Sec 3
FINRA Rule 1210
FINRA Rule 2010
FINRA Rule 8311
Indirect owner and associate charged with failing to cooperate with a FINRA investigation
Both individuals failed to produce documents and information and failed to appear and provide testimony as requested.
This is a complaint and not an AWC.
FINRA Rule 2010
FINRA Rule 8210
Product representative suspended and fined for allegedly falsely certifying that he had personally completed the continuing education required to hold an insurance license
Another person had completed 15 hours of insurance continuing education on his behalf.
FINRA Rule 2010
| Unless otherwise noted all respondents accepted and consented to FINRA’s findings without admitting or denying them. |
