Enforcement Actions
Financial Industry Regulatory Authority (FINRA)
CONTINUING EDUCATION
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.
David Elijah McKee (Principal)
AWC/2008011640801

In his capacity as the vice president of compliance, McKee failed to supervise certain aspects of his member firmís securities business

Acting on his firmís behalf, McKee failed to

  • establish and maintain a supervisory system or written supervisory procedures reasonably designed to detect and prevent the firm from charging excessive commissions on mutual fund liquidation transactions;
  • adequately supervise the firmís communications with the public;
  • adequately supervise the firmís compliance with NASD Rule 3070 and Uniform Termination Notice for Securities Industry Registration (Form U5) reporting provisions and customer complaint recordkeeping requirements; and
  • comply with NASD Rules 3012 and 3013, in that the Rule 3012 and 3013 reports that he prepared on his firmís behalf were inadequate.

Thee firmís 3012 report for one year was inadequate because it failed to provide a rationale for the areas that would be tested, failed to detail the manner and method for testing and verifying that the firmís system of supervisory policies and procedures were designed to achieve compliance with applicable rules and laws, and did not provide a summary of the test results and gaps found. The 3012 report also failed to detect repeat violations including, the failure to conduct annual Office of Supervisory Jurisdiction (OSJ) branch office inspections, advertising violations, customer complaint reporting and ensuring that all covered persons participated in the Firm Element of Continuing Education.

The firm's 3013 report for one year did not document the processes for establishing, maintaining, reviewing, testing and modifying compliance policies to achieve compliance with applicable NASD rules, MSRB rules and federal securities laws, and the manner and frequency with which the processes are administered. In addition, the firm failed to enforce its 3013 procedures regarding notification from customers regarding address changes.

David Elijah McKee (Principal): Fined $15,000; Suspended 30 business days in Principal/Supervisory capacities only
Bill Singer's Comment

These types of cases always strike me as "sloppy" because they largely have to do with failures to document actions that have usually been taken.  Pardon my cynicism but, hey, even the preparation of an insincere report is better than simply failing to prepare any report.

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