The Firm conducted an inadequate investigation ofits representativesí involvement in a Ponzi scheme and of allegations two registered representatives made
. The firm became aware that two of its registered representatives had participated in unapproved private securities transactions
by facilitating investments in the Ponzi scheme for themselves and others, some of whom were firm customers, without notifying the firm or obtaining its permission. The firm initiated an investigation regarding their conduct and to determine whether any other registered representatives were involved in the Ponzi scheme. The firm sent a questionnaire to its registered representatives in two states soliciting information about any involvement in the Ponzi scheme. Notwithstanding the allegation two registered representatives made that one of the firmís insurance supervisors knew about their involvement with the Ponzi scheme, the firm permitted him to be one of the people collecting responses to the firmís questionnaire.
The firm failed to fully investigate the extent of the insurance supervisorís involvement with the Ponzi scheme despite evidence discovered later that should have led the firm to conclude that he was involved.
Counsel for the two registered representatives informed the firm that a member of the firmís supervisory staff had suggested that the registered representatives destroy documents and provide misleading information in connection with the firmís internal investigation. Under the circumstances, the firm took inadequate steps to investigate these allegations.
The firm had an inadequate system for reviewing electronic communications. The firmís computer system allowed compliance staff in branch offices, in certain circumstances, to review their own email as well as the email of their supervisors.