International Research Securities censured and fined for allegedly not maintaining required minimum net capital
An Economic Injury Disaster Loan (EIDL) taken out by the firm as a result of the COVID-19 pandemic increased the firm’s aggregate indebtedness and, because of some incorrect assumptions and calculations, led to the firm’s net capital falling below the required minimum. The issues also led to a failure to preserve accurate records and inaccurate reporting by the firm.
Exchange Act § 15(c) Exchange Act § 17(a) Exchange Act Rule 15c3-1 Exchange Act Rule 17a-3 Exchange Act Rule 17a-5 Exchange Act Rule 17a-11 FINRA Rule 2010 FINRA Rule 4110 FINRA Rule 4511
Securities representative suspended and fined for alleged trading without a customer’s authorization or consent
FINRA Rule 2010
Madison Avenue censured and fined for alleged transaction suitability shortcomings and supervisory system failures
The system and processes in place at the firm resulted in customers losing out on potential sales charge discounts through the right of accumulation (an advantage accruing to investors purchasing the same mutual fund or single mutual fund family to reach a breakpoint level that attracts a discount). A total of 12 firm customers lost out on potential fee discounts as a result of these failings and a restitution of $63,296 plus interest has also been ordered.
FINRA Rule 2010 FINRA Rule 3110
Former securities representative barred for allegedly refusing to produce information
FINRA Rule 2010 FINRA Rule 8210
Merrill Lynch censured and fined for alleged calls to people registered on the national do-not-call registry
Trainees participating in the firm’s development program, which included a business development component, made unsolicited telemarketing calls to individuals on a do-not-call-list. Despite having access to the firm’s electronic systems that flagged numbers that should not be called, thousands of outbound calls were placed to those numbers by the trainees.
The firm conducted a monthly review of trainees to ensure compliance with telemarketing rules. However, this review was limited to those numbers entered into the firm’s system as prospective clients. If a number was not entered into the system it was not included in the monthly review. In other words the process design for monitoring compliance was ineffective because the actual calls placed were not subject to review. The firm self-reported the problem and implemented better technology, and also improved its monitoring processes as well as its procedures and training.
FINRA Rule 2010 FINRA Rule 3110 FINRA Rule 3230
SprinkleBrokerage and its CEO censured and fined for alleged AML program failures
The firm did not have adequate AML procedures in place, in particular those addressing customer due diligence. The firm’s customers were entities that obtained investments from retail investors to acquired shares of companies prior to their IPO. Following an IPO those shares were deposited into the SprinkleBrokerage accounts and then transferred to other customers at other firms. Those ‘other customers’ were purportedly the retail investors from whom investments had initially been obtained.
The AML risks connected to these customers and transactions were not adequately assessed by SprinkleBrokerage. The firm also failed to adequately monitor information concerning the beneficial ownership of those entities. The firm also failed to update its Form BD to update a change of its location from New Jersey to Sweden.
FINRA By-laws Article IV, Section 1(c) FINRA Rule 1122 FINRA Rule 2010
| Unless otherwise noted all respondents accepted and consented to FINRA’s findings without admitting or denying them. |