Securities Industry Commentator by Bill Singer Esq

April 4, 2018

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")
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.  

In accordance with the terms of the Offer of Settlement, FINRA ordered that Fanning be (1) suspended from association with any FINRA member firm in any capacity for six months; (2) then immediately following, suspended from association with any FINRA member firm in a principal capacity for twelve months; and (3) required to pay a fine of $20,000.

Stormy Daniels Issue Hits FINRA Arbitration Remand ( Blog)
Among the more difficult roles that I have as the publisher of the Blog is to present an analysis of a case in which I am troubled by the facts and angered by the decision. In reporting on Wall Street's legal, regulatory, and compliance developments, I frequently find myself at odds with the powers that be. I am an unabashed libertarian (with a small "l") and an unrepentant advocate for free-markets, robust competition, and fair play. I love the clash of ideas in the marketplace. I detest when vested interests unbalance the scales. I hate it when corrupt politicians and regulators do the bidding of their patrons and rig the system. Yes . . . your're right . . . I'm not always right, everyone else is not always wrong, and sometimes I just need to chill. That being said, you're an idiot and I fully respect that you have the right to be wrong. Having shown my magnanimous attitude, let me present to you today's featured court opinion about Wall Street arbitration . . . grrrrrrrrrr . . .

FINRA Settles Private Securities Transactions Supervision Case (FINRA AWC) For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Richard Hunt Crockett submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Richard Hunt Crockett, Respondent (AWC 2017053992302, April 3, 2018).
In pertinent part, the AWC alleges that:

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.

In accordance with the terms of the AWC, FINRA imposed upon Crockett a $5,000 fine and a two-month suspension in all principal capacities from association with any FINRA member firm