NOTE: Stipulations of Fact and Consent to Penalty (SFC); Offers of Settlement (OS); and Letters of Acceptance Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions & to the entry of findings. Additionally, for AWCs, if FINRA has reason to believe a violation has occurred and the member or associated person does not dispute the violation, FINRA may prepare and request that the member or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's or associated person's right to a hearing before a hearing panel, and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed.

Carlton Capital, Inc.
AWC/2006003684702

The Firm failed to comply with the Taping Rule, in that it 

• provided certain representatives with access to unrecorded telephone lines;
• allowed representatives to accept customer orders on unrecorded telephone lines when the representatives were out of the office; and 
• failed to catalog tape recordings that registered persons had made. 

During a later period, the Firm installed a new system that recorded telephone calls to the hard drives of the computers on representatives’ desks, which was not password protected and was backed up by the firm only once a year, and which allowed representatives access to erase recorded telephone calls. 

Carlton Capital, Inc.: Censured; Fined $40,000; Required to Comply with the NASD Rule 3010(b)(2) (the Taping Rule) for an additional three years until February 17, 2012 and to Retain an independent consultant to conduct a comprehensive review of the adequacy of its policies, systems and procedures (written and otherwise) and training related to compliance with the Taping Rule, and adopt and implement the consultant’s recommendations