- Van Dusen Standards and
- The Firm and Proposed Supervision
As a registered representative, X was responsible for knowing the rules of the securities industry and for providing information regarding his bankruptcy to Firm 2 on a timely basis to update his Form U4. Enforcement already weighed the gravity of X’s failure to disclose, however, when it approved the AWC in March 2006. Moreover, during the course of its investigation of X’s failure to disclose, Enforcement had the opportunity to review X’s complete regulatory and employment history. At the conclusion of its review, Enforcement determined that a three-month suspension was an appropriate sanction for X, which he has served.
VAN DUSEN STANDARDS
In such circumstances, the Commission has instructed FINRA to evaluate a statutory disqualification application pursuant to the standards enunciated in the Commission’s decisions in Van Dusen.
First, the record shows that X has no complaints, regulatory actions, or criminal history since FINRA’s 2006 AWC. Second, we look to the nature and disciplinary history of the Sponsoring Firm. The Sponsoring Firm does have some formal disciplinary history, but the record shows that the Sponsoring Firm has taken corrective actions to address its noted deficiencies. Moreover, the Sponsoring Firm has proposed a comprehensive supervisory plan for X. Third, we find that the Proposed Supervisor is well qualified. He has been in the securities industry since 1997 without any disciplinary history, and he has been a general securities principal since 1998.
PLAN OF HEIGHTENED SUPERVISION
The Sponsoring Firm has agreed to the following comprehensive supervisory plan to ensure that it will be able to maintain heightened supervision for X. The items that are denoted with an asterisk (*) are conditions of heightened supervision for X. Other registered representatives of the Sponsoring Firm are not subject to these heightened supervisory conditions.
1. *The Sponsoring Firm will amend its written supervisory procedures to state that the Proposed Supervisor is the primary supervisor responsible for X;
2. X will not maintain discretionary accounts;
3. X will not act in a supervisory capacity;
4. The Proposed Supervisor will supervise X on-site at the Firm’s main office in City 1;
5. The Proposed Supervisor will review and pre-approve each securities account prior to X opening the account. The Proposed Supervisor will document the account paperwork as approved with a date and signature and maintain the paperwork at the Sponsoring Firm’s home office;
6. *The Proposed Supervisor will review and approve X’s orders after execution, or as soon as practicable, on a “T + 1” basis. The Proposed Supervisor will then review the trade reports, on a T + 1 basis, evidence his review by initialing the trade reports, and keep copies of the trade reports segregated for ease of review;
7. The Chief Compliance Officer, or his designee, will review X’s incoming written correspondence (which would include email communications) upon its arrival and will review outgoing correspondence before they are sent;
8. *For the purposes of client communication, X will only be allowed to use an email account that is held at the Sponsoring Firm, with all emails being filtered through the Sponsoring Firm’s email system. If X receives a business-related email message in another email account outside the Sponsoring Firm, he will immediately deliver that message to the Sponsoring Firm’s email account. X will also inform the Sponsoring Firm of all outside email accounts that he maintains. The Proposed Supervisor will conduct a weekly review of all email messages that are either sent or received by X. The Proposed Supervisor will maintain the emails and keep them segregated for ease of review during any statutory disqualification audit;
9. All complaints pertaining to X, whether verbal or written, will be immediately referred to the Chief Compliance Officer, or his designee. The Compliance Department will prepare a memorandum to the file as to what measures were taken to investigate the merits of the complaint (e.g., contact with the customer) and the resolution of the matter, and will keep documents pertaining to these complaints segregated for ease of review;
10. If the Proposed Supervisor is on vacation or out of the office, Employee 1, the Chief Compliance Officer, will act as X’s interim supervisor;
11. For the duration of X’s statutory disqualification, the Sponsoring Firm must obtain prior approval (or subsequent approval, if warranted) from Member Regulation if it wishes to change X’s responsible supervisor from the Proposed Supervisor to another person; and
12. *The Proposed Supervisor must certify quarterly (March 31st, June 30th, September 30th, and December 31st) to the Compliance Department of the Sponsoring Firm that he and X are in compliance with all of the above conditions of heightened supervision to be accorded X.