AWC/2008011649201
The Firm failed to
- create and maintain adequate records of customer complaints,
- report timely statistical and summary information concerning the complaints, and
- timely report the settlement of one of the complaints.
- timely update a registered person’s Uniform Application for Securities Industry Registration or Transfer (Form U4) upon learning of the facts and circumstances giving rise to the amendments.
- implement its own heightened supervisory procedures with respect to registered representatives on heightened supervision.
When establishing its heightened supervision procedures, the firm decided to exclude brokers on heightened supervision from its monthly surveillance report; accordingly, the activities of the registered representatives under heightened supervision were not shown. The special supervisor designated to manually review all trades of registered representatives on heightened supervision for suitability and excessive trading relied on his manual review when determining which accounts should be reviewed and contacted “for cause,” rather than choosing clients at random and with cause based on trading activity. FINRA found that this was inadequate because the manual review failed to identify numerous accounts that had turnover ratios in excess of six times the average equity annualized.
AWC/2009018793601
AWC/2008015403102
OS/2008011678304
As his member firm’s AMLCO, Kobin failed to
- implement policies and procedures reasonably expected to detect and cause the reporting of transactions required under 31 USC 5318(g) and implementing regulations;
- provide AML training for firm personnel, failed to adequately review customer activity for compliance with AML rules and to adequately review suspicious activity and file timely SARs where appropriate;
- fulfill his responsibility to access the Financial Crimes Enforcement Network (FINCEN) of the United States Department of Treasury to review requests for information, under Section 314(A) of the USA Patriot Act, relating to possible money laundering or terrorist activity;
- search firm records to determine whether the firm maintained, or had maintained, any account for, or had engaged in any transactions with, any individual, entity or organization named in FINCEN’s requests.
As a result of the firm’s inadequate AML program, the firm, acting through Kobin, failed to timely detect, investigate and report suspicious activity to achieve compliance with the Bank Secrecy Act.
Kobin failed to
- identify red flags in connection with suspicious account activity, did not timely investigate or review the red flags, and caused his firm’s failure to timely report the suspicious activity;
- implement the firm’s procedures for suspicious activity detection and reporting, monitor and investigate approximately $6 million in suspicious wires to and from one of its branches,
- detect and timely report suspicious activity and maintain documentation evidencing a review for suspicious activity of securities transactions, money movements and securities transfers;
- ensure that a designated principal review and approve all correspondence to and from branch offices, including electronic correspondence.
- failed to properly create, maintain and timely file records and reports of customer complaints, and failed to timely update Forms U4 and Forms U5 relating to persons who were registered with FINRA through his firm in his capacity as his firm’s Chief Compliance Officer (CCO), .
- take adequate steps to comply with the Firm Element of the Continuing Education Requirement and, as a result, his firm did not conduct the required annual needs analysis or develop a written training plan.
- ensure that each registered person was clearly assigned to an appropriately registered representative and/or principal responsible for supervising that person’s activities,
- conduct an annual compliance interview or meeting,
- implement an adequate supervisory control system over the firm’s branch office managers, sales managers or any person performing a similar function; specifically, the firm’s written supervisory procedures failed to identify producing managers for purposes of review and supervision of their customer account activity; assign a person who was either senior to, or otherwise independent of, the producing manager to perform such supervisory reviews; and reasonably ensure that the firm calculate, on a rolling, twelve-month basis, whether heightened supervision requirements were triggered with any respect to any producing managers.
AWC/2009017831001
AWC/2008014753602
Biremis employed an individual as its controller and as controller for several of its affiliated companies who was arrested and charged with numerous criminal violations. The individual informed Beck that criminal charges had been filed against him and, although the individual misrepresented the nature of the charges, Beck failed to follow up or otherwise investigate the criminal allegations against the individual. Beck failed to instruct other firm employees to investigate the charges against the individual. The Firm's written supervisory procedures, which were Beck’s responsibility, did not require any such follow-up.
FINRA found that the individual was convicted, which made him statutorily disqualified from employment in the securities industry; and the firm, acting through Beck, failed to file a written application (Membership Continuance Form-400 (MC-400)) for relief from the statutory disqualification so that the individual could continue to associate with the firm, and the individual continued working as the firm’s Financial and Operations Principal (FINOP).
Acting through Beck, the Firm failed to establish, maintain and enforce a supervisory system and/or written supervisory procedures reasonably designed to investigate prospective employees’ backgrounds, follow up on any red flags and achieve compliance with its registration and Uniform Application for Securities Industry Registration or Transfer (Form U4) reporting obligations.
Biremis, Corp: Censured; Fined $50,000
Peter Beck: Fined $10,000; Suspended 6 weeks in Principal capacity only
AWC/2009017210601
OS/2008014589701
2006003834901
Zayed willfully failed to disclose material information on multiple Forms U4.
OS/2009016548801
OS/2008011684002
AWC/2009020451701
AWC/2008014690901
AWC/2007007151705
As his member firm’s president, Amico failed to adequately supervise the firm’s chief compliance officers (CCOs) and AML compliance officers (AMLCOs). Amico knew, or should have known, of substantive violations of FINRA rules and the potential inadequacy of firm compliance personnel through FINRA exit conference reports that the firm failed to
- properly report customer complaints and other reportable matters,
- make Form U4 or Form U5 amendments to report disclosable events, and
- timely amend Forms U4 or U5.
Amico received FINRA exit conference reports regarding violations of the BSA and FINRA AML rules. Amico received SEC written findings identifying suspicious penny stock transactions, AML program issues and reporting deficiencies.
As the president and owner of the firm, Amico was responsible for the firm’s compliance with regulatory requirements imposed on the firm and knew, or should have known, that the firm’s CCOs and AMLCOs were not performing the compliance functions designated to them. Amico knew through FINRA exit conference reports and SEC written findings that the firm, through the CCOs and AMLCOs, was not in compliance with BSA requirements and NASD Rule 3011, was not making necessary filings under NASD Rule 3070 and Article V, Sections 2 and 3 of FINRA’s By-Laws, and that one of the CCOs/AMLCOs had a disciplinary history but failed to take affirmative steps to ensure that they were performing the AML and reporting functions delegated to them.
AWC/2007007151703
Acting in his capacity as the AMLCO, Brown failed to
- implement policies and procedures reasonably designed to detect and cause the reporting of suspicious transactions under 31 USC 5318(g) and implementing regulations;
- detect and investigate suspicious activities and/or other activities in which red flags of money laundering were present and filing a SAR, when appropriate; and
- follow up on red flags indicating that a registered representative was selling unregistered shares of a stock on behalf of the CEO of the issuer, and did not follow up to ascertain what, if any, steps the representative took to inquire about the transactions.
Brown was notified by his member firm’s clearing firm that it was closing the CEO’s account and would allow only liquidating (sell) transactions, but although Brown responded to the clearing firm, he did not adequately follow up to ensure additional purchase transactions did not take place—which did occur. As his firm’s CCO, Brown failed to supervise firm personnel who had been delegated responsibility for reporting, and timely reporting, customer complaints under NASD Rule 3070(c), and to make Forms U4 and U5 amendments with FINRA to report disclosable events.
AWC/2007007151704
Newbridge facilitated the manipulative trading of the stock of a company created as the result of a reverse merger.
A group of control persons and promoters used accounts at the firm to execute pre-arranged in-house agency cross and wash transactions that were intended to generate volume and support or increase the price of the stock. The firm permitted control persons to sell unregistered securities through firm accounts, and the sales were not made in compliance with any applicable exemption from registration. The firm failed to
- adequately supervise the registered representatives who participated in the sales of unregistered securities;
- take adequate measures to ensure that the registered representatives assigned to the accounts did not engage in the sale of unregistered securities;
- take steps to ensure that the registered representative ascertained
- whether the securities being sold were registered
- how and from whom the customers had obtained their shares,
- whether and when the shares were paid for, and
- whether the transactions were subject to any exemption from registration.
Further, the Firm failed to adequately supervise registered representatives who participated in the manipulative trading.
The firm did not have adequate systems or controls to implement and enforce its policies, particularly adequate systems to detect improper cross, wash and other manipulative trading. The firm’s AML procedures required the firm to investigate red flags indicating suspicious activity or trading, and to investigate and take appropriate steps, including limiting account activity, contacting a government agency or filing a SAR, but the firm failed to follow its AML program in regard to the manipulative trading, unregistered distributions and other suspicious activities.
The firm failed to report, or timely report, customer complaints reportable under NASD Rule 3070(c). In addition, firm failed to file Forms U4 or U5 to report disclosable events and failed to timely amend a Form U4 to report a disclosable event.
AWC/2007007151701
Acting in her capacity as her member firm’s AMLCO, Bush failed to implement policies and procedures reasonably designed to detect and cause the reporting of suspicious transactions under 31 USC 5318(g) and implementing regulations thereunder.Bush failed to ensure her firm’s overall compliance with NASD Rule 3011 by detecting and investigating suspicious activities or other activities in which red flags of money laundering were present and, when appropriate, filing SARs.
As her firm’s CCO, Bush failed to adequately supervise firm AMLCOs and ensure they were performing their functions pursuant to the firm’s AML program and written procedures, and failed to ensure they were properly investigating suspicious activities, recommending and filing SARs or documenting the rationale for concluding that a SAR was unnecessary.
Bush failed to adequately supervise the firm’s DSCO to ensure he was taking adequate investigative steps to ascertain whether certain customer transactions were part of a manipulative or fraudulent scheme, conducting adequate criminal or securities disciplinary background checks, and conducting adequate due diligence to ascertain whether customers engaging in significant designated securities transactions had any affiliations with the issuers; in fact, many customers had criminal or securities disciplinary backgrounds or had close ties to issuers whose shares they were trading.
As her firm’s CCO, Bush failed to ensure her firm reported, and timely reported, customer complaints to FINRA. FINRA also found that Bush failed to ensure her firm filed, and timely filed, Forms U4 and U5 with FINRA to report disclosable events.
AWC/2007007151706
AWC/2009020633801
AWC/2009018890801
AWC/2009020127301
AWC/2007010828201
AWC/2009018966701
AWC/2008011678303
Acting through its chief compliance officer (CCO), the firm:
- failed to establish and implement an adequate AML program and related procedures; adequately identify, investigate and respond to red flags of suspicious activities;
- timely file a Suspicious Activity Report (SAR); and
- provide AML training for firm personnel for one year.
Acting through a registered representative, the firm
- improperly facilitated the distribution of approximately 20 million shares of various unregistered securities;
- operated an unregistered branch office, in violation of the restriction on business expansion contained in its membership agreement, and
- engaged in improper telephone solicitations (from the unregistered office) by making materially false representations and omitting material facts in connection with the offer of securities and by using misleading telemarketing scripts that a registered principal had not approved.
Acting through the registered representative and CCO, the firm failed to perform adequate searching inquiries and take necessary steps to ensure that transactions did not involve distributions of unregistered and/or restricted securities.
Acting through a registered representative and firm principal, the firm sold securities to public investors using a private placement memorandum that omitted to disclose a convicted felon’s association with the issuer, a material fact to any reasonable investor.
Acting through various FINOPs, the firm
- failed to maintain accurate financial books and records,
- filed inaccurate FOCUS reports and
- operated a securities business while under minimum net capital requirements.
Acting through the CCO and other compliance officers, the firm
- failed to forward customer funds it received in connection with contingency offerings to an escrow agent by noon of the next business days after receipt of such fund;
- adequately review and approve customer correspondence;
- timely and accurately report customer complaints;
- timely update Uniform Applications for Securities Industry Registration or Transfer (Forms U4) and Uniform Termination Notices for Securities Industry Registration (Forms U5);
- comply with the Firm Element of the Continuing Education Requirement for a year;
- conduct an annual compliance meeting; and
- establish an adequate business continuity plan, which consequently led to the loss of access to certain customer records upon termination of its relationship with a particular clearing firm.
The firm had additional supervisory deficiencies, including that
- its written supervisory procedures failed to establish adequate procedures for review of producing managers’ customer account activities,
- it failed to have written supervisory procedures for identifying producing managers that should be subject to heightened supervision, and
- failed to place certain producing managers on heightened supervision, in that, acting through various individuals, the firm failed to clearly assign each registered person to an appropriately registered representative and/or principal responsible for supervising that person’s activities, and designate principals with actual authority to carry out the supervisory responsibilities over the firm’s business.
Acting through a supervising principal, the firm failed to reasonably supervise registered representatives working out of the unregistered branch office.
Acting through firm officers, the firm failed to establish and maintain a supervisory system reasonably designed to supervise the sales activities of firm personnel conducted outside of its registered offices, and failed to establish and maintain a supervisory system for determining whether customer securities were properly registered or exempt from registration.
Acting through its CCO, the firm failed to implement adequate procedures to ensure that the firm did not telephone persons who stated they did not wish to receive calls and/or who registered on the national do-not-call registry, and failed to adequately update and maintain a do-not-call list.
Acting through various supervisors, the firm failed to perform heightened supervision over numerous individuals.
AWC/2009018811801
AWC/2009019551901
OS/2009016956501
AWC/2008015306401
AWC/2009018404901
AWC/2009018338201
AWC/2009020252101
AWC/2008016025801
OS/2009017153701
2008015348101
OS/2007011348301
Gest
- recommended risky and illiquid CMO positions to his customers, and intentionally and/or recklessly made misrepresentations of material facts and omitted to disclose material facts to customers in connection with their CMO investments;
- failed to provide his customers with material information concerning the bonds as contained in prospectuses, prospectus supplements or any offering circulars relating to the particular CMO tranches purchased that document various applicable risk factors that an investor should consider before investing;
- recommended CMO positions to customers without investigating and understanding the products and without reasonable grounds to believe that CMO investments were suitable, as he lacked an understanding of the material characteristics of, and risks associated with, the CMOs offered;
- lacked reasonable grounds to believe the CMO program and CMO investments were suitable for his customers based upon their disclosed investment experience, investment objectives, financial situation and needs, and he did not have reasonable grounds to believe that the use of margin was suitable for customer CMO purchases;
- exercised discretionary authority in customer accounts without his customers’ prior written authorization and his member firm’s prior written acceptance of the accounts as discretionary; and
- willfully failed to timely update his Form U4 with material facts.
AWC/2008015576601
AWC/2008015147201
AWC/2009018000801
2007007377801
AWC/2009018362902
OS/2008015104301
AWC/2009019686401
2008013810901
AWC/2009017023601
AWC/2008011675701
Brookstone Securities failed to ensure that each of its registered representatives and registered principals participated in an annual compliance meeting. The Firm failed to timely update a registered representative’s Uniform Application for Securities Industry Registration or Transfer (Form U4) to disclose required information and failed to timely disclose customers’ complaints pursuant to NASD Rule 3070.
The Firm failed to report quarterly statistical customer complaints; failed, in some instances, to create and maintain a record of customers’ complaints and related records that included the complainant’s information; and, alternatively, failed to maintain a separate file that contained complainant’s information.
The Firm failed to report transactions to the Trade Reporting and Compliance Engine (TRACE) and failed to evidence the creation and maintenance of order tickets for sell transactions in corporate bond transactions.
AWC/2009018311501
AWC/2008013951601
AWC/2008015462601)
AWC/2009017985801
2008016429801
2007007873101
Ellis engaged in outside business activities without providing prompt written notice to his member firm. Ellis managed customers’ accounts and effected trades in commodity futures contracts and commodity futures options through commodity trading firms and earned commissions from the firms. Ellis completed quarterly compliance questionnaires for his firm that inquired if he had engaged in an outside business activity while associated with the firm, and he answered “no” to this question, thereby knowingly providing false information to his firm, which caused its firm’s books and records to be inaccurate.
Ellis willfully failed to timely amend his Form U4 with material information.
2008013087201
2008013969501
AWC/2008014686502
2006006192901
2008012721801
AWC/2008014957101
AWC/2009019257401
AWC/2009016864001
AWC/2008014567501
2008012122001
2007009472201
AWC/2008011727801
AWC/2008011703401
- amend Uniform Applications for Securities Industry Registration or Transfer (Forms U4) to disclose registered representatives’ liens and bankruptcies,
- submit amended Uniform Termination Notices for Securities Industry Registration (Forms U5) to report investment-related complaints against registered representatives, and
- file FINRA Rule 3070 reports with FINRA.
AWC/2009016491301
AWC/2008012375801
AWC/2009017277501
2008013113401)
AWC/2009017553401
2007009139501
AWC/2008015957201
2007011826401
AWC/2008013628501
AWC/2008014936401
AWC/2007008162201
The Firm allowed its research analysts to use third-party email systems but did not reasonably enforce a system to audit or review their email correspondence.
The Firm permitted an individual registered as a General Securities Principal and General Securities Representative to supervise the conduct of its research analysts without passing either the Series 16 Supervisory Analyst or the Series 87 Research Analyst exams as FINRA rules required.
The Firm failed to develop and implement an AML program reasonably designed to achieve and monitor its compliance with the requirements of the Bank Secrecy Act and the implementing regulations thereunder; the firm’s AML program had inadequate procedures governing the testing of its AML program; and the firm’s testing of its AML procedures was inadequate and not independent one year, and not tested another year.
The Firm failed to timely report statistical and summary information regarding customer complaints and failed to amend, timely amend or ensure the amendment of Uniform Applications for Securities Industry Registration or Transfer (Forms U4) or Uniform Termination Notices for Securities Industry Registration (Forms U5) to disclose customer complaints and their resolution.
The Firm failed to retain originals of certain incoming and outgoing written correspondence relating to its business, received by mail and by fax,or copies of such correspondence and failed to adequately enforce written supervisory procedures prohibiting firm personnel from using third-party, non-firm email accounts for firm business.
OS/09-ARCA-12
Cutler Group L.P., an NYSE Arca Options trading permit holder, failed to
- preserve certain electronic communications in the required format;
- maintain a complete and accurate list of accounts in which its employees had a direct or indirect financial interest;
- obtain, maintain and review monthly account statements for accounts in which its employees had a direct or indirect financial interest;
- file a complete and accurate annual acknowledgment attestation with the exchange;
- appropriately conduct background checks of its associated persons; and
- establish, maintain, and/or enforce appropriate written policies and procedures for supervision and control, including a separate system of follow-up and review, with respect to certain of the foregoing areas.
The NYSE found the following violations:
- Section 17(a)(1) of Exchange Act, and Rules 17a-4(b)(4) and 17a-4(f) thereunder, and NYSE Arca Options Rule 11.16(a) by failing to preserve business-related e-mail and instant messages in non-rewriteable, non-erasable format, and by failing to preserve business-related fax communications
- NYSE Arca Options Rule 11.3—Commentary .03 by failing to maintain complete and accurate list of accounts in which employees had direct or indirect financial interest, and by failing to obtain, maintain and review monthly account statements for accounts in which employees had direct or indirect financial interest;
- NYSE Arca Options Rule 11.3(a) by failing to establish, maintain, or enforce adequate written policies and procedures reasonably designed to prevent misuse of material, non-public information by employees;
- Section 17(a)(1) of Exchange Act, and Rule 17a-3(a)(12) thereunder, and NYSE Arca Options Rule 11.16(a), by failing to appropriately conduct and document background checks of employees prior to employment, and by failing to properly retain and preserve manually signed Forms U-4;
- NYSE Arca Options Rule 11.18 by failing to establish, maintain, and/or enforce appropriate written policies and procedures for supervision and control, including separate system of follow-up and review, in following areas:
- (a) conducting and documenting background checks of employees prior to employment, including maintaining complete and accurate signed Forms U-4;
- (b) retention in proper format and review of business-related e-mails, instant messages and faxes sent or received by employees; and
- (c) prevention of misuse of material, non-public information by employees .
AWC/2008016450001
2008012666801
AWC/2007007358604
Registered Principal Brennan failed to reasonably supervise and respond to warning signs that registered representatives were conducting and operating a securities business from an unregistered branch office without supervision. The representatives
- improperly solicited potential customers by telephone in connection with the offer of securities,
- made false representations, including unwarranted price predictions,
- omitted material facts, and
- used misleading telemarketing scripts that a registered principal had not approved.
Brennan failed to timely amend his Uniform Application for Securities Industry Registration or Transfer (Form U4) to disclose material information.
E3A2005003702
AWC/2007011343301
The Firm failed to
- report quarterly statistical and summary information to FINRA regarding a substantial number of customer complaints;
- establish,maintain and enforce a supervisory system reasonably designed to identify, capture, analyze and report customer complaints that are required to be reported pursuant to NASD Rule 3070(c);
- put adequate systems and procedures in place to ensure that all customer complaints were identified and forwarded to the appropriate firm personnel,
- adequately train all personnel who might potentially receive customer complaints regarding proper handling of complaints, and
- ensure that sufficient guidance was given to personnel who were responsible for reviewing complaints to determine which complaints were reportable.
- 529 College Savings Plan
- Abandoned Accounts
- Algorithmic Trading
- Altered Customer Phone Records
- AML
- Annual Compliance Certification
- Annual Compliance Meeting
- Annuity
- Asset Purchase Agreement
- ATM
- Away Accounts
- Background
- Bank
- Banks
- Beneficiary
- Best Efforts Offering
- Blackjack
- Borrowed
- Borrowing
- Breakpoint
- Casino
- CE
- CFTC
- Changes Of Address
- Check
- Check Kiting
- Checks
- CIP
- CMO
- Commodity Futures
- Commodity Pool
- Communications
- Computers
- Confidential Customer Information
- Contingency Offering
- Continuing Education
- Conversion
- Conviction
- Cooperation Agreement
- Correspondence
- Credit Cards
- Currency
- Day Trading
- Deceased
- Delivery Instructions
- Discretion
- Do Not Call
- EIA
- Elderly
- Electronic Communications
- Electronic Storage
- Embezzled
- Escheat
- Escrow
- Estate
- Expenses
- False Proof Of Insurance
- False Statements
- Fax
- Federal Appeal
- Felony
- Finder Fees
- Finder\\\'s Fees
- Fingerprints
- FINOP
- Firm Committment Offering
- FOCUS
- FOREX
- Forgery
- Freely-Tradable
- Futures
- Gifts
- Guaranteeing Against Losses
- Hedge Fund
- Impersonation
- Inspections
- Instant Messaging
- Insurance
- Internet
- Investment Advisor
- Letter Of Credit
- Life Insurance
- Living Trust
- LOA
- Loan
- Log On IDs
- Margin
- Mark-Up Mark-Down
- Material Change Of Business
- Membership Agreement
- Minimum Contingency
- Modification Of Sanctions
- Money Laundering
- MSRB
- Mutual Fund
- Mutual Funds
- NAC
- Net Capital
- Notary
- Notice Of Levy
- NSF
- Operations Manager
- Options
- Orders
- OSJ
- Outside Accounts
- Passwords
- Payphones
- POA
- Policy Lapse
- Ponzi
- Power Of Attorney
- Pre-arranged Trading.
- Private Placement
- Private Securities Transaction
- Producing Manager
- Production Quota
- Promissory Notes
- Proprietary Traders
- Public Appearances
- Qualified Domestic Relations Order
- Radio
- Regulation S-P
- REIT
- Research
- Restitution
- SAR
- Scripts
- Signature
- Solicited
- Statutory Disqualification
- Suitability
- Supervision
- Supervisory System
- Surrender Charge
- Surrender Charges
- Suspense Account
- Taping Rule
- Telemarketing
- Television
- Term Life
- Testing
- Third Party Vendor
- Time & Price Discretion
- Trading Limits
- Trading Volume
- Trust Account
- Turnover
- Two Party Consent
- U.S. Treasuries
- UIT
- Unclaimed Funds
- Universal Lease Programs
- Unregistered Office
- Unregistered Person
- Unregistered Principal
- Unregistered RRs
- Unregistered Securities
- Unregistered Supervisor
- Variable Annuity
- Variable Insurance
- Website
- Willfully
- WSP
- Zero Coupon