Enforcement Actions
Financial Industry Regulatory Authority (FINRA)
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.
January 2010
J.J.B. Hilliard,W.L. Lyons, LLC
AWC/2007009463801/January 2010

The Firm failed to have an adequate supervisory system, including written supervisory procedures and a supervisory control system, to properly and timely identify customer checks deposited at affiliated bank branches and ensure that all customer check deposits were duly credited to the appropriate customer accounts. The Firm escheated approximately $133,616.65 in funds to the Commonwealth of Kentucky when it was unable to identify the proper customer accounts. As a result of the unidentified customer check deposits, the firm failed to make and keep accurate daily records of all receipts and disbursements of cash and other debits and credits in its books and records, including entries to an Escheatment Account. The Firm understated its net capital charges and incorrectly calculated its Customer Reserve Formula. In addition, the Firm produced inaccurate month-end customer account statements, incorrectly liquidated certain customer fully paid securities, and failed to segregate some customers’ fully paid securities, resulting in intra-day possession or control deficits. The Firm did not prepare required inter-company account reconciliations, failed to properly record certain aged unfavorable reconciliation differences and failed to conduct supervisory reviews of certain reconciliations and accounts.

The Firm ’s supervisory procedures did not adequately ensure that its research analysts obtained the required approval for public appearances and provided proper disclosures during such public appearances. In addition, the Firm issued certain research reports that

  • contained indefinite “may” language regarding future investment banking services that the firm expected to provide,
  • did not include analyst certifications on the front page,
  • contained front pages that did not specify the page or pages in the research report on which the analyst certifications were to be found, and
  • incorrectly included the analyst certification information as part of the important disclosures.
J.J.B. Hilliard,W.L. Lyons, LLC: Censured, Fined $200,000; Required to place $133,817 into a segregated, interest-bearing account for a period of five years to reimburse customers who can reasonably demonstrate that they made deposits to their firm accounts at a bank branch and that the firm failed to properly credit the deposits to their accounts.
Tags:  WSP    Supervisory System    Check    Escheat    Public Appearances     |    In: Research and Advertising
Bill Singer's Comment
An interesting segregation plan -- well tailored to address the specific issue.  Smart move by FINRA.
Enforcement Actions