Enforcement Actions
Financial Industry Regulatory Authority (FINRA)
CASES OF NOTE
2010
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.
February 2010
Stoever, Glass & Company, Inc. and Michael Francis Carrigg (Principal)
AWC/2007007247301/February 2010
Acting through Carrigg, the Firm failed to track customer checks that were outstanding and uncashed for more than one year and, as a result, failed to make attempts to
  • reissue checks,
  • recredit customer accounts,
  • contact the customers regarding unclaimed funds, and/or
  • comply with state laws concerning unclaimed property.
The Firm essentially had the benefit of the unclaimed funds in its account that was used for operating expenses. While the firmís bank balance remained positive, acting through Carrigg, the Firm failed to detect that the operating account was overdrawn, in that the firm did not have sufficient funds in the account to pay for all of the outstanding checks.

Acting through Carrigg, the Firm failed to prepare an accurate Reserve Formula computation and therefore failed to make required deposits to its Special Reserve Bank Account that it was required to maintain pursuant to Securities and Exchange Commission (SEC) Rule15c3-3. While the firmís operating account balance remained positive, acting through Carrigg, the Firm failed to account for the uncashed, outstanding checks.

Stoever, Glass & Company, Inc.: Censured; Fined $90,000 ($15,000 joint/several with Carrigg); and Required to retain an independent consultant to review the adequacy of its policies, systems, procedures (written and otherwise) and training relating to its financial and operations systems, and to ensure the proper disposition of outstanding, uncashed checks at the firm).

Michael Francis Carrigg:
Fined $10,000; Fined $15,000 joint/several with Firm; Suspended in Principal capacity only for 6 months.
Tags:  Check    Unclaimed Funds         |    In: Cases of Note : FINRA
Bill Singer's Comment
Frankly, an interesting case because it underscores an issue that may be overlooked in the regular course of business but, as FINRA notes, can snowball into a potentially serious bookkeeping/accounting issue.  While almost all firms will have the occasional uncashed check, the fact remains that until such time as the underlying funds are restored to the client via a reissued check or other credit, those wayward funds are likely being utilized by the member.  Such bookkeeping runs afoul of a number of accounting fail-safes, not the least of which is Net Capital and/or Special Reserve formulas.

While the fines and suspensions here appear at first glance to be heavy-handed (if not apparently excessive), when one considers that FINRA's asserts that there were numerous customer checks that remained uncashed or outstanding in excess of a year, that strongly suggests an impaired in-house system.  Frankly, FINRA makes the case for imposing stronger sanctions here. 

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