- issued research reports that the firm labeled ďAsset Analysis FocusĒ (AAF) on a paid subscription basis;
- did not consider the AAF a research report;
- did not have in place policies and procedures designed to ensure compliance with the various research related rules applicable to firms that issue research reports, such as those relating to research analyst and research principal registration, disclosures, conflicts, annual attestations and written supervisory procedures;
- allowed registered representatives at the firm to collaborate in the preparation of AAFs without having passed a qualifying examination,
- allowed an individual also to collaborate in the preparation of AAFs without being registered as a general securities representative or in any other capacity through the firm, and without having passed a qualifying examination.
A general securities principal supervised the preparation of AAFs without having passed the qualifying examination.
Certain AAFs the firm issued failed to disclose certain NASD Rule 2711 required information, including the financial interest in the issuer of the research analysts who prepared the reports, price charts for issuers where the firm has assigned a price target for at least one year, and the valuation methods used to determine price targets and the risks that may impede achievement of the price targets.
An individual who collaborated in the preparation of AAFs purchased securities of companies during the 30-day period before the publication of the research reports concerning those companies. In addition, The firm did not have the required research report-related written supervisory procedures in place, and the firm did not have a senior officer make the required annual attestation that the firm had adopted and implemented the required written supervisory procedures.
Moreover, the Firm did not make the required annual attestations for several years and filed inaccurate annual attestations for other years.
Acting through Baldwin, CMG Institutional Trading
- participated in securities related activities without employing a qualified municipal securities principal;
- failed to timely file quarterly lists of issuers with which it engaged in a municipal securities business;
- failed to adopt, maintain and enforce written supervisory procedures reasonably designed to ensure that the conduct of the broker and associated persons in municipal securities activities are in compliance with Municipal Securities and Rulemaking Board (MSRB) rules and that the procedures shall codify the brokerís supervisory system for ensuring compliance;
- had an inadequate Anti-Money Laundering (AML) compliance program, in that it failed to
- verify customer identification information,
- conduct independent testing of its AML program,
- designate a person to transmit contact information to FINRA and
- to provide AML training for two years;
- failed to timely create and maintain a business continuity plan and engaged in securities transactions without a qualified financial and operations principal (FINOP);
- conducted a securities business while its net capital was below the required minimum;
- failed to prepare an accurate general ledger, trial balances and books and records; and failed to file an annual audit report and a quarterly Financial and Operational Combined Uniform Single (FOCUS) report; and
- failed to file an application for approval of a material change in its business operations even though it participated in an offering as an underwriter on a firm commitment basis, and disseminated sales literature that contained numerous inaccuracies and misrepresentations.
Also, the firm permitted Baldwin to engage in its securities business even though his registration was inactive because he had failed to complete a continuing education course.
FINRA's National Adjudicatory Council (NAC) imposed these sanctions following appeal of an Office of Hearing Officers (OHO) decision:
CMG Institutional Trading, LLC: Expelled
Shawn Derrick Baldwin (Principal): Barred
Rukujzo participated in the negotiation and consummation of an Asset Purchase Agreement transaction, involving
- another FINRA member,
- a non broker-dealer entity, and
- an entity which was a customer of his member firm.
The transaction resulted in the transfer from the other FINRA member of multiple customer mutual fund positions for which Rukujzoís firm had become the dealer of record to the dominion and control of his firmís customer (the entity), which exposed customersí accounts to losses as a result of the entityís speculative margin trading. Rukujzoís firm facilitated the transfer of certain positions held directly at mutual fund companies to an omnibus margin account held and maintained at the firmís clearing firm in the name of the entity, for which the firm was the broker-dealer of record. The Firm advised its clearing firm that the customers had authorized the use of their mutual fund assets as collateral when in fact, the customers did not sign any margin authorization forms, and information sent to the customers did not mention a margin account, the use of margin in investment strategies, or the use of the customerís assets as collateral to support margin trading in the omnibus account.
Rukujzo allowed an unregistered person to function as a representative and the firmís principal without being registered. Under Rukujzoís direction and control, his firm engaged in the change of dealer of record designation without the customerís authorization, and allowed his firm to participate in a transaction that he knew, or should have known, required approval from FINRA, and that approval was neither requested nor obtained.
Registered Principal Busacca failed to reasonably supervise the firm's operations and failed to diligently address numerous problems at the firm, including, but not limited to, inaccurate box counts, accurate securities position records, violations of section 220.8 of Regulation T of the Federal Reserve Board, failing to maintain margin requirements, failing to report data pursuant to NASD Rule 3150 and problems with transfers of customersí accounts. As the firmís President, Busacca permitted a non-registered person to act in a principal capacity as the firmís chief compliance officer.
The FINRA Hearing Panel (OHO) suspended Busacca for six months in all principal capacities and fined him $25,000 for failing to reasonably supervise the operations of North American Clearing, Inc., f/k/a Advantage Trading Group, Inc. (hereinafler, ďNorth AmericanĒ or the ďFirmĒ), in violation ofNASD Rules 3010 and 2110. The OHO Panel also fined Busacca $5,000 for permitting North American, as its president, to employ an unregistered chief compliance officer, in violation of NASD Rules 1022 and 2110. On appeal, FINRA's National Adjudicatory Council (NAC) sustained the OHO's findings and sanctions.
This decision has been appealed to the SEC and the sanctions are not in effect pending consideration of the appeal.
Small failed to establish and maintain adequate supervisory procedures concerning the review of
- email correspondence,
- incoming and outgoing hard copy correspondence at the firmís branch offices that he was in charge of, and
- outside investment activity of registered representatives at the firm.
- NASD Rule 3012(a)(2)(B) and its requirement that members establish, maintain and enforce procedures reasonably designed to review and monitor transmittals of funds or securities between customers and registered representatives, and
- NASD Rule 3012(a)(2)(C) and its requirement of an analysis and determination of whether producing branch office managers should have been subjected to heightened supervision.
- 529 College Savings Plan
- Abandoned Accounts
- Algorithmic Trading
- Altered Customer Phone Records
- Annual Compliance Certification
- Annual Compliance Meeting
- Asset Purchase Agreement
- Away Accounts
- Best Efforts Offering
- Changes Of Address
- Check Kiting
- Commodity Futures
- Commodity Pool
- Confidential Customer Information
- Contingency Offering
- Continuing Education
- Cooperation Agreement
- Credit Cards
- Day Trading
- Delivery Instructions
- Do Not Call
- Electronic Communications
- Electronic Storage
- False Proof Of Insurance
- False Statements
- Federal Appeal
- Finder Fees
- Finder\\\'s Fees
- Firm Committment Offering
- Guaranteeing Against Losses
- Hedge Fund
- Instant Messaging
- Investment Advisor
- Letter Of Credit
- Life Insurance
- Living Trust
- Log On IDs
- Mark-Up Mark-Down
- Material Change Of Business
- Membership Agreement
- Minimum Contingency
- Modification Of Sanctions
- Money Laundering
- Mutual Fund
- Mutual Funds
- Net Capital
- Notice Of Levy
- Operations Manager
- Outside Accounts
- Policy Lapse
- 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
- Regulation S-P
- Statutory Disqualification
- Supervisory System
- Surrender Charge
- Surrender Charges
- Suspense Account
- Taping Rule
- Term Life
- Third Party Vendor
- Time & Price Discretion
- Trading Limits
- Trading Volume
- Trust Account
- Two Party Consent
- U.S. Treasuries
- Unclaimed Funds
- Universal Lease Programs
- Unregistered Office
- Unregistered Person
- Unregistered Principal
- Unregistered RRs
- Unregistered Securities
- Unregistered Supervisor
- Variable Annuity
- Variable Insurance
- Zero Coupon