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.
Martinez-Ayme Securities and Alfredo Francisco Ayme (Principal) AWC/2009016159201/December 2009
The Firm's anti-money laundering (AML) program required the firm and Ayme to
monitor for potentially suspicious activity and AML red flags,
investigate potentially suspicious activity and
report suspicious activity by filing a Form SAR-SF with the U.S. Department of the Treasuryís Financial Crimes Network.
The Firm and Ayme
failed to adequately implement or enforce its AML program and to otherwise comply with their AML obligations since they did not identify and analyze numerous transactions to determine if they were in fact suspicious, which would require them to be reported on a Form SAR-SF;
permitted suspicious activities to occur undetected and unchecked; and
failed to file SAR-SFs as appropriate.
The Firm conducted tests for compliance with applicable AML laws, rules and regulations, but these tests were not independent since they were conducted by a firm employee who performed AML functions as part of his regular job responsibilities.
Also, the Firm
acted as the placement agent for contingency securities offerings and failed to establish escrow or separate bank accounts in connection with the offerings, and investors were directed to transmit their funds directly to the issuers prior to the contingency being satisfied;
failed to satisfy the minimum contingency for one offering by the closing date, but the offering was not terminated, investor funds were not returned and the offering period was extended; and
raised additional funds but failed to send written reconfirmation offers to subscribers disclosing the extension of the offering prior to the closing date, thereby willfully violating Section 10(b) of the Securities Exchange Act, Rule 10b-9 thereunder and NASD Rule 2110.
Finally, the Firm used the instrumentalities of interstate commerce to conduct a securities business while failing to maintain its minimum required Net Capital.
Mesirow Financial, Inc. AWC/2008012747801/December 2009
Mesirow's clearing agreement with correspondent firms impermissibly allocated the detection and reporting of suspicious activity with respect to trading activities of introduced customer securities accounts to the introducing correspondent firms. The Bank Secrecy Act imposes an independent obligation to detect and report suspicious activity on all broker-dealers. Consequently, the firmís AML program was not reasonably designed to detect and cause the reporting of suspicious trading activity in customer accounts.
ViewTrade Securities, Inc. AWC/2008011725001/December 2009
The Firm failed to properly implement its AML compliance program, insofar as it did not monitor corporate accounts brought to the firm from a defunct broker-dealer by registered representatives for red flags and did not identify potentially suspicious activity for further due diligence.
A registered representative at the firm sent business-related emails from a non-firm email address that were not maintained on the firmís server in a non-rewritable, non-erasable format, but were obtained from the representativeís computer, where they could have been deleted or lost.
Wadsworth Investment Co., Inc. and William Frederick Wadsworth (Principal) OS/2006003806202/November 2009
The Firm and Wadsworth
permitted an individual to act as an unregistered principal and permitted individuals to be registered as General Securities Representatives or Investment Company and Variable Contracts Products Representatives through the firm without being active in the firmís securities business;
sent written communications to customers and prospective customers containing language that failed to provide a sound basis for evaluating the claims within the communications, and that omitted material information and/or contained unwarranted statements;
failed to record a
general securities principalís approval on mutual fund and variable
completed and signed a materially inaccurate FINRA
Information Request form; and
provided inaccurate information to FINRA
Acting through Wadsworth, the Firm failed to
establish and , maintain a supervisory system and written supervisory procedures reasonably designed to achieve compliance with applicable securities laws and regulations;
conduct annual reviews of any of the business in which the firm engaged
review registered representativesí business-related email correspondence with customers;
establish any written procedures providing for the review of its registered representativesí electronic correspondence;
designate and specifically identify at least one principal to FINRA who would establish, maintain and enforce a system of supervisory control policies and procedures, a
establish, maintain and enforce written supervisory controlpolicies and procedures
required information on new account forms, and on mutual fund and
variable annuity applications.
Acting through Wadsworth, the Firm
maintained forms of various types that were blank except for customersí
filed inaccurate Financial
and Operational Combined Uniform Single (FOCUS) reports setting forth
the firmís net capital position that was accurate by failing
to maintain accurate financial books and records; and
did not file an
application with FINRA for approval of an ownership change until after
the ownership change took place.
The Firm failed to
implement anti-money laundering compliance procedures, including independent testing and provide training;
enforce the Customer Identification Procedures;
retain electronic communications; and
failed to provide written confirmations to customers at or before the completion of securities transactions acted as an unregisteredmunicipal securities broker-dealer.
The Firm executed municipal securities transactions without creating and retaining order tickets to properly recordthe transactions, and failed to report municipal securities trades to the MSRB.
Wadsworth Investment Co., Inc.: Censured; Fined $100,000 ($77,250 jt/sev with William Wadsworth); Required to hire an independent consultant to review its policies,
systems, procedures (written and otherwise) and training related to its
violations of federal securities laws, FINRA and MSRB rules, and
implement the consultantís recommendations. William Frederick Wadsworth: Fined $77,250 jt/sev with the Firm; Suspended 1 month in all capacities; Suspended 1 year in Principal capacities only.
In a recent FINRA regulatory settlement, a Barclays research analyst got a job offer from an issuer he was covering. FINRA makes the case that the job offer posed a conflict and should have been disclosed to the employer. Fair enough -- I agree; however, when considering FINRA's charges against the analyst, I was reminded of a similar scenario involving... Read On