UBS censured and fined for allegedly failing to monitor transmittals of customer funds to third parties
A registered representative at the firm sold a fixed annuity product offered by a company formed by a college friend to at least 30 UBS customers.
Despite the funds facilitating the purchases being wired directly from the customers’ accounts this particular product was not approved or offered by UBS.
The representative’s sales of the product only came to light when a former UBS customer tried to withdraw her entire investment and was unable to do so.
The customers who purchased the fixed annuity product lost “most, if not the entirety, of their investments.” UBS repaid the customers, making good their losses.
The firm failed to reasonably respond to red flags that suggested its representative was participating in private securities transactions. The wire transfers were designated as “investment” or “for investment” by the customers and flagged for “additional review and approval”. But UBS failed to investigate these and other red flags further.
FINRA Regulatory Notice 12-05 FINRA Regulatory Notice 09-64 FINRA Rule 2010 FINRA Rule 3110 NASD Rule 3010 NASD Rule 3012
Lincoln Financial Distributors censured and fined for alleged transaction-based compensation payments to an unregistered entity
The firm paid $8.7m to an unaffiliated selling broker-dealer in connection with the sale of a securities product – $2.9m of these funds were then paid, at the direction of the firm, to an unregistered entity.
FINRA Rule 2010 FINRA Rule 2040
Joseph Gunnar censured and fined for allegedly charging an unfair commission on transactions
A minimum commission was charged by the firm in addition to a handling fee. This resulted in the firm charging a commission that was unfair (in many instances exceeding 5% of the transaction’s principal account) on 1,683 transactions.
On 14 occasions the firm also failed to file private-placement offering documents with FINRA.
A restitutionary payment of $69,898.17 plus interest has been ordered.
FINRA Rule 2010 FINRA Rule 2121 FINRA Rule 3110 FINRA Rule 5123
Former securities representative suspended and fined for alleged failings connected with an outside business activity as well as customer documentation
The representative had disclosed his outside business activity to the firm, but did not disclose a change in the scope of his activities to include solicitation of donor-advised funds.
The representative sent 27 blank documents to two firm customers for their signature and added information to the documents after obtaining those signatures.
FINRA Rule 2010 FINRA Rule 3270 FINRA Rule 4511
Former securities principal suspended and fined for alleged Reg BI violations
The principal had “recommended and effected 22 unsuitable short-term switches in Class A mutual fund shares in accounts held by two senior customers”.
In doing this the principal failed to consider the customers’ investment objectives and time horizons and also whether the customers could have reduced their transaction costs by switching within the same fund family.
A restitutionary payment of $31,675.14 has been ordered.
FINRA Rule 2010 FINRA Rule 2111 SEA 1934 Rule 15l-1 SEC Reg BI
FNBB Capital Markets censured and fined for the alleged failure to include mark-up and mark-down information in retail customer confirmations
A total of 121 non-institutional customer confirmations for municipal transactions were issued. Although these included the mark-up and mark-down values as dollar amounts, they did not include information on these as a percentage of the prevailing market price.
The omission was the result of the firm not selecting the appropriate fields in its clearing firm’s systems when entering the transactions and the omission was not caught by the firm’s supervisory system.
The firm has agreed to an undertaking requiring it to certify in writing the remediation of the issues identified.
MSRB Rule G-15 MSRB Rule G-27
Unregistered associate suspended for allegedly failing to disclose a felony charge in Form U4
FINRA By-Laws Article V FINRA Rule 1122 FINRA Rule 2010
Former customer service representative barred for allegedly refusing to provide documents and information
FINRA Rule 2010 FINRA Rule 8210
Securities principal suspended for allegedly failing to establish, maintain and enforce a supervisory system
In his capacity as CEO and CCO the principal failed to develop and implement an identity theft prevention program.
The firm’s WSPs required the verification of each transmittal of funds, but did not:
- specify acceptable types of confirmation;
- require the verification of the customer prior to the approval of the transmittal request;
- define what constituted suspicious behavior or red flags;
- provide instructions on how to investigate or address suspicious behavior.
The firm relied on its clearing firm to verify transmittal instructions despite the fact that this was not the clearing firm’s responsibility.
The firm’s WSPs related to possible identity theft were generic and not tailored to the firm’s actual structure or business and did not contain any guidance on how to identify or detect it.
These failings led directly to customer loss when a customer’s email account was hacked and the firm received instructions to liquidate securities and transfer nearly the entire value of the account to outside bank accounts.
The principal was aware of the responsible registered representative’s suspicions that the customer’s account had been compromised, but despite this – and multiple red flags – approved the liquidation and transfer requests.
The principal has been directed to requalify by passing the requisite examination prior to acting in this capacity with any FINRA member in the future.
FINRA Rule 2010 FINRA Rule 3110 FINRA Regulatory Notice 09-64 Regulation S-ID Rule 201
PFS Investments censured and fined for not enforcing outside business activity policy requirements
Three of the firm’s registered representatives founded an independent company whose activities constituted outside business activity.
The firm was aware of the outside business activity because of conversations between it and the representatives as well as complaints by other representatives about the marketing of the independent firm’s services on social media.
Despite this the firm did not at any point require written disclosure of the outside business activity as required.
Approximately a year after becoming aware of the outside business activity the firm “instructed the representatives that they could no longer remain associated with PFSI” unless they terminated their work on this.
The representatives did not immediately leave the firm, only terminating their association with the firm months later, continuing to engage in the oustide business activity throughout their time of being associated with the firm.
FINRA Rule 2010 FINRA Rule 3110 FINRA Rule 3270
| Unless otherwise noted all respondents accepted and consented to FINRA’s findings without admitting or denying them. |