FINRA Settles Failure to Supervise Case (FINRA Offer of Settlement) In response to the filing of a Complaint on December 12, 2018, by the Financial Industry Regulatory Authority's ("FINRA's") Department of Enforcement, Respondent Jeffery Allen Fanning submitted an Offer of Settlement dated March 19, 2018, which the regulator accepted. Under the terms of the Offer of Settlement, without admitting or denying the allegations in the Complaint, Respondent Jeffery Allen Fanning consented to the entry of findings and violations and to the imposition of the sanctions. FINRA Department of Enforcement, Complainant, vs Jeffery Allen Fanning, Respondent (Order Accepting Offer of Settlement, FINRA Office of Hearing Officers, 2015043246401, April 2, 2018) (the "Order") http://www.finra.org/sites/default/files/fda_documents/2015043246401%20
As alleged in the Order:
Between January 2014 and September 2015 ("the relevant period") Respondent Jeffery Allen Fanning failed to reasonably supervise the equity trading of registered representatives at his firm, Liberty Partners Financial Services, LLC ("Liberty"), for potentially excessive trading, and, even where his reviews identified potentially excessive trading, Fanning failed to reasonably address that activity. Fanning also failed to ensure that Liberty's written supervisory procedures ("WSPs") described how the firm would identify or address potentially excessive equity trading, and he failed to ensure that the WSPs accurately reflected the methods Liberty employed to supervise for potentially excessive trading. Fanning's failure to reasonably supervise Liberty for potentially excessive trading and failure to establish, maintain, and enforce a reasonably designed supervisory system, including written supervisory procedures ("WSPs"), in connection with reviewing customer accounts for excessive equity trading violated NASD Rule 3010(a) and (b) and FINRA Rules 3110(a) and (b) and 2010.In August 2014, Fanning signed letters misrepresenting the nature of two registered representatives' employment with Liberty to the United States Citizenship and Immigration Service ("USCIS"). By doing so, Fanning violated FINRA Rule 2010.
During the Relevant Period, Crockett was responsible for reviewing and approving the outside business activities ("OBAs") and private securities transactions of Osprey's registered representatives. Crockett approved certain of Osprey's brokers' OBAs with BCG, which described itself as "a multi-strategy investment holding company located in New York City."During the Relevant Period, certain of Osprey's brokers, through BCG, offered and sold more than $8 million in promissory notes in BCG and in BIF, a fund marketed by BCG involving real-estate investments in Belize. The brokers that sold investments in BCG and BIF were compensated directly by BCG.Crockett approved the brokers' private securities transactions in BCG and BIF, but failed to reasonably supervise those transactions. In particular, Crockett did not perform due diligence on the BCG or BIF offerings. Instead, Crockett relied on an Osprey registered representative, M.M., to perform due diligence on the offerings. M.M., however, was a principal of BCG and was therefore not in a position to independently review the merits of BCG or BIF.