Enforcement Actions
Financial Industry Regulatory Authority (FINRA)
CASES OF NOTE
2011
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 2011
Birkelbach Investment Securities, Inc. and Carl Max Birkelbach (Principal)
OS/2009016354101/October 2011

Acting through Birkelbach, the Firm failed to adequately supervise to ensure the timely reporting of customer settlements. Birkelbach relied on an unregistered outside consultant to process Rule 3070 filings and amendments to Applications for Broker-Dealer Registration (Forms BD) and Uniform Applications for Securities Industry Registration or Transfer (Forms U4), gave the consultant inadequate instructions and guidance, and did not otherwise ensure that timely and complete filings and amendments were made.

Birkelbach neglected to instruct the consultant to process disclosures or otherwise take action to correct the deficiencies until a later date, even after FINRA advised him of the deficiencies.

Birkelbach and the firm failed to ensure the timely reporting of settlements with customers on 3070 filings and the amendment of Forms BD and Forms U4 to disclose this information.

Birkelbach Investment Securities, Inc.: Censured; Fined $10,000, jointly and severally with Carl Birkelbach

Carl Max Birkelbach: Censured; Fined $10,000, jointly and severally with Birkelbach Invst.; Fined additional $15,000; Suspended 30 days in all capacities; Suspended 90 days in Principal capacity only; Required to requalify by examination as a principal.

Tags:  Supervision    Supervisory System     |    In: U4, U5, RE-3, Rule 3070
Bill Singer's Comment
Okay, fine -- HOWEVER, why is it that when it's a smaller firm these failure to supervise cases also reference BOTH the FINRA member firm and the individual principal, but when it's a larger firm either only the member firm gets whacked, or, if FINRA also names a larger firm's principal that it's done in a separate decision?
August 2011
LPL Financial LLC
AWC/2010021545201/August 2011

A firm representative submitted a written request to conduct a live call-in finance- and investment-related radio show to be broadcast in Farsi; the firm had various written procedures relating to the supervision of its representativesí public appearances, which, among other things, required that the first three radio shows be submitted to the firmís advertising compliance department as soon as they had aired and that the advertising compliance department would contact representatives quarterly to request copies of specific shows during a randomly chosen date range for review.

The firm approved the representativeís request and required the representative to provide a translated copy of the show upon a quarterly request, and an unaffiliated third-party translation company was to complete the translation. For five years, the representative, together with another representative, aired approximately 520 shows on a particular radio station; the format was typically a live call-in show, in Farsi, discussing financial issues and investments, but the firm failed to request or review copies or transcripts of the broadcasts.

LPL Financial LLC: Censured; Fined $25,000
Tags:  Broadcast    Supervisory System     |    In: Cases of Note : FINRA
Bill Singer's Comment
FINRA's on solid ground with this settlement. It's one thing to miss a few broadcasts or fail to obtain a few transcripts but there's little excuse when the sample of aired programs is 520 shows over five years and the Firm dropped the ball.  As always, if you're going to draft policies and procedures, you better expect that FINRA will not  be pleased if you don't follow your own rules.
March 2011
LPL Financia Corporation nka LPL Financial LLC
AWC/2009016922702/March 2011

LPL failed to establish, maintain and enforce a supervisory system, including written supervisory procedures reasonably designed to review and monitor all transmittals of funds and securities from customer accounts to third party accounts and to registered representativesí accounts.

The firmís supervisory control procedures for third-party transmittals included the use of an Office of Supervisory Jurisdiction Review Tool (ORT) to monitor third-party disbursements; ORT was designed to identify only transmittals of cash, e.g. in the form of checks, Automated Clearing House (ACH) transactions, or wire transfers to third parties. The firmís control procedures for review using ORT did not address journals between accounts and one of the firmís registered representatives exploited this failure and journaled $40,000 in cash as well as securities out of customersí accounts to his personal account, and converted the cash and proceeds from the sale of the journaled securities in the aggregate amount of over $1 million.

The firmís procedures required that any journal that results in assets being journaled into a registered representativeís personal account must be submitted to a supervisor for approval, and the firm failed to document any approvals of the subject journals or document that the requests were escalated to a supervisor for further review. While the firmís procedures required that the firm send a written confirmation to the customerís address of record in conjunction with all third-party journals, the firm failed to send written confirmations in conjunction with some third-party journals.

LPL Financia Corporation nka LPL Financial LLC : Censured; Fined $100,000
Tags:  Conversion    Supervisory System     |    In: Cases of Note : FINRA
Bill Singer's Comment
You sort of get the sense that someone was really asleep at the LPL switch. It's one thing to not have policies and procedures and to violate FINRA rules; however, when you have such protocols but then don't follow the supervisory procedures inherent in your own in-house policies -- geez, that's not gonna end well.
Enforcement Actions
Tags
Email Bill Singer Connect with Bill Singer on Facebook Follow Bill Singer on Twitter Link up with Bill Singer on LinkedIn Join Bill Singer on Google+