Synergy Investment Group LLC - AWC/2007007139501 - 2009 FINRA Enforcement Actions

Enforcement Actions

Financial Industry Regulatory Authority (FINRA)

CASES OF NOTE

2009

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.

October 2009 - View all for this month

Synergy Investment Group LLC
AWC/2007007139501

The firm failed to

establish and implement policies and procedures reasonably designed to detect and cause the reporting of suspicious customer activity;
detect, investigate and conduct due diligence when red flags associated with suspicious activity were present;
file Suspicious Activity Reports (SARS) when red flags associated with suspicious activity were present;
follow its written supervisory procedures, in that it failed to conduct appropriate risk-based due diligence for correspondent accounts of foreign financial institutions customers owned, and failed to implement adequate supervisory procedures to monitor the suspicious activity in those accounts;
perform AML customer identification reviews for customers, as required by its procedures, which would have revealed that several accounts appeared to be shell vehicles for possible securities fraud;
file SARS on individuals possibly engaged in insider trading; and
adequately test its AML compliance program and, during a two-year period, failed to conduct or document AML training.

The Firm paid transaction-related compensation to non-registered foreign finders who did not meet the requirements for compensation; failed to provide documents to its customers that disclosed the compensation being paid to foreign finders, and the customers’ confirmation statements failed to indicate that a referral or finder’s fee was being paid. The foreign finder signed account documents and no one from the firm signed the documents accepting the accounts which contained discrepancies and were incomplete. Moreover, the Firm failed to establish and maintain a supervisory system reasonably designed to achieve compliance with rules relating to its foreign finders and foreign associates business.

The Firm failed to establish and maintain a supervisory system reasonably designed to achieve compliance with FINRA’s advertising rules resulting in firm violations with its Web site and advertisements.

Synergy Investment Group LLC: Censured; Fined $75,000

Bill Singer's Comment

I'm wondering if FINRA hired a new editor to write the October disciplinary reports because the quality of information and explanation has gotten noticeably better this month - and this case is yet another example. Keep up the good work, folks.

Note that in addition to the by now somewhat standard SAR allegations in Synergy (that comment is not intended to diminish or downplay the importance of monitoring such activity but to merely note that these lapses are becoming far too common), we see the second foreign finders' fee payment citation this month. See Bear Stearns/Fourcade for another example.

Let me take this opportunity to expand a bit on this issue.

Under FINRA/NASD Member and Registration Rule 1060: Persons Exempt from Registration, note the following

(b) Member firms, and persons associated with a member, may pay to nonregistered foreign persons transaction-related compensation based upon the business of customers they direct to member firms if the following conditions are met:

(1) the member firm has assured itself that the nonregistered foreign person who will receive the compensation (the "finder") is not required to register in the U.S. as a broker/dealer nor is subject to a disqualification as defined in Article III, Section 4 of the Association's By-Laws, and has further assured itself that the compensation arrangement does not violate applicable foreign law;

(2) the finders are foreign nationals (not U.S. citizens) or foreign entities domiciled abroad;

(3) the customers are foreign nationals (not U.S. citizens) or foreign entities domiciled abroad transacting business in either foreign or U.S. securities;

(4) customers receive a descriptive document, similar to that required by Rule 206(4)-3(b) of the Investment Advisers Act of 1940, that discloses what compensation is being paid to finders;

(5) customers provide written acknowledgment to the member firm of the existence of the compensation arrangement and that such acknowledgment is retained and made available for inspection by the Association;

(6) records reflecting payments to finders are maintained on the member firm's books and actual agreements between the member firm and persons compensated are available for inspection by the Association; and

(7) the confirmation of each transaction indicates that a referral or finders fee is being paid pursuant to an agreement.

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It's All Over Now: My 42-year Wall Street Journey by Bill Singer, Esq.

January 30, 2024

Before my second career as a lawyer, I was the third generation of my family in the wine and liquor industry. In 1981, I started law school; and in 1982, I was hired as a law student in Smith Barney, Harris & Upham's Legal Department. After I graduated law school, I was a regulatory lawyer with the American Stock Exchange and then with the NASD (now... Read On

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