WestPark Capital censured and fined for alleged AML and other compliance failures
The firm did not establish and implement reasonable AML procedures for detecting suspicious trading including market manipulation. The firm’s trade review procedures were inadequate given the volume of transactions the firm facilitated. Suspicious trading patterns and red flags in connection with a jurisdiction classified as a major money-laundering risk (China) were not investigated as a result.
Customer identification and due diligence requirements were also deficient and the issues were compounded by the designation of a person without any securities registrations as the primary contact for two issuers and the “many customers referred to the firm by those issuers”. This person utilised WeChat, an unapproved business communications method, to communicate with the issuers and customers. These communications were neither retained or reviewed.
The firm failed to implement appropriate policies and procedures to ensure that certain resale transactions were eligible for the Rule 144 safe harbour and relied solely on the fact that restrictive legend had been removed by a transfer agent as proof that the securities could be sold.
WestPark as well as its CEO, as part of an AWC, consented to offer rescission to holders of 19 notes, but failed to tell FINRA that it had thwarted the rescissory relief by contacting holders and persuading them to sign agreements rejecting any offers that the firm would eventually be required to make.
Finally, the firm failed to supervise a registered representative who engaged in unsuitable trading, charging excessive markups and markdowns and also allowed a supervisor to supervise his own trading activity.
A restitutionary payment of 218,160.36 plus interest has been ordered as part of the AWC. The firm has also agreed to an undertaking to retain an independent consultant at its own expense as well as an undertaking to certify in writing within 90 days that the issues identified have been remediated.
FINRA Rule 2010 FINRA Rule 3110 FINRA Rule 3310 FINRA Rule 5310 NASD Notice to Members 02-21 FINRA Regulatory Notice 19-18 FINRA Regulatory Notice 09-05
Former securities representative suspended and fined for allegedly participating in private securities transactions without notifying his firm
FINRA Rule 2010 FINRA Rule 3280
Interactive Brokers censured and fined for allegedly failing to comply with best execution requirements
In connection with marketable customer orders the firm did not reasonably assess whether venues that did not offer priced indications of interest might offer greater price improvements before routing the orders.
In connection with non-marketable customer orders where no material difference existed between prices offered by two or more exchange rates the firm appropriately randomized routing. But adjusted this toward the end of certain periods to “achieve exchange volume thresholds that would increase the amount of the exchange rebate payable” to the firm.
The firm’s reviews of the quality of best execution were not reasonably regular, sufficiently rigorous and were not adequately documented. The reviews did not take all relevant execution factors under consideration and “did not regularly consider the execution quality that might have been available at competing venues.”
The firm routed marketable orders to two broker-dealers trading on a net basis in connection with approximately 10.4 million customer transactions. By doing this the firm interjected third parties between it and the best markets.
Finally the firm did not reasonably supervise its best execution and failed to disclose material aspects of its relationships with venues.
Exchange Act Rule 606 FINRA Rule 2010 FINRA Rule 3110 FINRA Rule 5310 FINRA Rule 5310.09 NASD Rule 3010
LPL Financial censured and fined for alleged failures to supervise direct business and switch transactions
The firm supervised transactions by reviewing exception reports, but its system did not ensure that direct business transactions were ingested into these reports. Despite receiving commission records from product sponsors, which alerted it to the fact that some transactions went unreported it simply fined representatives who did not report transactions without undertaking any further remedial action to address the underlying problem.
The firm did not collect essential information from customers that was relevant to assessing the suitability of the transactions and did not have a system in place to ensure that it had collected and maintained the required customer account information.
The firm failed to reasonably supervise the suitability of switch transactions and sent customers approximately 11,300 letters that materially misstated the fees customers incurred in connection with these.
In addition the firm’s supervisory systems were not reasonably designed to ensure that recommendations of Listed BDCs complied with Reg BI’s customer care obligations.
A resititutionary payment of $651,374.51 plus interest has been imposed along with an undertaking requiring the firm to certify in writing within 90 days that the firm has remediated the issues identified during the supervisory review.
Exchange Act Rule 17a-3 Exchange Act Rule 15l-1 FINRA Rule 2010 FINRA Rule 3110 FINRA Rule 4511 NASD Rule 3010 Regulatory Notice 22-08
Securities representative suspended and fined for allegedly entering the incorrect representative code in the firm’s trading system
The representative entered into an agreement with another representative at the firm to share a joint representative code, which was also shared with a retired representative. The representative overrode the firm’s system for 248 trades, which he erroneously believed the agreement did not apply to.
FINRA Rule 2010 FINRA Rule 4511
| Unless otherwise noted all respondents accepted and consented to FINRA’s findings without admitting or denying them. |