Independent Financial Group censured and fined for allegedly failing to comply with its Reg BI obligations
The firm did not have in place a supervisory system reasonably designed to supervise excessive trading and ensure compliance with Reg BI.
The firm’s compliance staff reviewed an excessive trade alert (generated by an external service provider) that “suffered from certain deficiencies of which the firm was unaware” including not appearing for review even if not yet reviewed.
The firm’s WSPs did not provide reasonable guidance about how compliance personnel should conduct review of excessive trade alerts or when they should take action in response to such alerts.
The WSPs did make supervisory staff responsible for identifying excessive trading. However:
- A senior supervisor instructed staff to assess each alert only as it pertained to the specific trade generating the alert (rather than an overall review of client transactions);
- The firm provided no guidance as to the factors that might suggest that excessive trading was taking place; and
- No guidance was offered as to the steps that needed to be taken should potential excessive trading be identified.
The firm failed to reasonably respond to red flags of excessive trading by a representative who excessively traded in five customer accounts by directing frequent in-and-out trading that resulted in $2.2m losses being realized.
In addition the firm failed to timely and completely respond to FINRA’s requests for documents and information.
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 2111
FINRA Rule 3110
FINRA Rule 8210
SEC Reg BI
SEA 1934 Rule 15l-1
Former products representative barred for failing to provide documents and information and appear for on-the-record testimony
FINRA Rule 2010
FINRA Rule 8210
Merrill Lynch and BofA Securities censured and fined for allegedly failing to file timely amendments to Forms U4
The forms report on the outside business activities of representatives and also keep their business addresses up to date.
The firms did not have in place any system that would verify the timely filing of amendments to these forms.
FINRA Rule 1122
FINRA Rule 2010
FINRA Rule 3110
SpeedTrader (Mint Global Markets) censured for alleged best execution and AML failings
The firm’s WSPs on best execution were inadequate. Its reviews for execution quality were limited to too small a sample of transactions and also unreasonable because they “the firm did not consider any execution quality factor other than price disimprovement.”
The firm also did not:
- Consider whether the firm could obtain better execution quality by modifying its routing arrangements with existing venues;
- Consider whether execution quality could be obtained from competing markets; and
- Reasonably review the impact its net trading arrangements with broker-dealers had on execution quality.
The firm also interjected third parties between it and the best markets and failed to disclose material aspects of its routing relationships with venues.
In addition, the firm failed to establish and implement a reasonably designed AML program given its customer base that included many customers located in foreign jurisdictions and those who actively trading low-priced securities. The firm failed to identify or investigate red flags and patterns of suspicious or potentially manipulative trading.
And finally the firm falsely responded to the Form CRS question concerning legal or disciplinary history.
In lieu of a monetary fine SpeedTrader “will retain an independent consultant to review and revise the firm’s supervisory system and procedures governing its best execution and AML obligations.”
FINRA Rule 2010
FINRA Rule 3110
FINRA Rule 3310
FINRA Rule 5310
FINRA Rule 5310.09
NASD Notice to Members 02-21
FINRA Regulatory Notice 19-18
SEA 1934 Rule 606
SEA 1934 Rule 17a-14
Park Avenue Securities censured and fined for alleged Reg BI failings
The firm failed to establish a supervisory system reasonably designed to achieve compliance with the care obligations of Reg BI in connection with mutual fund share class recommendations to retirement plan customers.
The firm’s WSPs failed to describe the steps the firm should take to evaluate whether recommendations were in their best interest or suitable for them.
FINRA Rule 3010
FINRA Rule 3110
SEA 1934 Rule 15l-1
SEC Reg BI
Former investment banking representative suspended and fined for allegedly engaging in outside business activities without notice or authorization
FINRA Rule 2010
FINRA Rule 3270
The Oak Ridge Financial Services Group censured and fined for allegedly charging unfair prices in corporate bond transactions
The firm used the incorrect prevailing market price of the bonds in 89 corporate bond transactions.
In addition in 27 corporate bond transactions the firm used a mark-up or mark-down that was unfair when compared to similar market transactions.
A restitutionary payment of $68,857.69 plus interest has been ordered.
FINRA Rule 2010 FINRA Rule 2121 FINRA Rule 3110
| Unless otherwise noted all respondents accepted and consented to FINRA’s findings without admitting or denying them. |