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.

Register Financial Associates, Inc.and George Robert Register (Principal)
OS/2007011496203

The Firm allowed an individual to function as a research analyst without having the required licenses. The Firm

• shared a draft of a section of a research report that contained a research summary, rating and price target with a subject company before it was published, and the draft was not provided to legal or compliance personnel at the firm;
• did not monitor or place restrictions on the trading of stock picks by research analysts, who placed trades in violation of the limits placed on analysts by NASD Rule 2711(g) and failed to retain records showing the dates that newsletters were published prior to 2005;
  
• failed to disclose the valuation methods it used to determine the price target and the risks to achieving the price target in the stock pick sections of its research report;
• failed to have a principal review, initial and date its published research reports before the earlier of its use or filing with FINRA’s Advertising Regulation Department;
• failed to adopt and implement written supervisory procedures to cover research reports distributed to the public and ignored red flags regarding stock pick sections qualifying as research reports; and
  
• failed to establish, maintain and enforce written supervisory procedures for its newsletter, in that the firm had no written supervisory procedures that governed research reports distributed to the public.

The Firm's research analysts failed to disclose their financial interests in stock picks and omitted material facts that rendered the stock pick section of research reports misleading.

The Firm and Register filed false attestations regarding compliance with NASD Rule 2711, and the Firm failed to make the certifications required by SEC Regulation AC for its stock pick sections that the views expressed accurately reflected the research analysts’ personal views. Furthermore, Register failed to adequately discharge his supervisory responsibilities and never took effective action to ensure that his firm was meeting its obligation to comply with FINRA rules, in that he never monitored the trading or ownership of stock picks by the firm’s research analysts, imposed no restrictions on whether the analysts could trade or own securities when they were profiled as stock picks, and allowed research analysts to publish research reports unsupervised.

Register Financial Associates, Inc.: Fined $50,000

George Robert Register (Principal): Fined $15,000; Suspended 30 days in Principal/Supervisory capacities only

Tags: WSP  research