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.
Broad Street Securities, Inc. AWC/2006006615402/November 2009
Acting through an individual, the Firm failed to
establish and maintain a system to supervise a registered representative who the firm employed;
establish procedures addressing heightened supervision; and
implement heightened supervision of the registered representative.
Broad Street Securities, Inc.: Censured; Fined $10,000
Investment Professionals, Inc. OS/2007008650302/November 2009
The Firm failed to establish and maintain supervisory systems and failed to establish, maintain and enforce written procedures reasonably designed to achieve compliance with applicable securities laws and regulations.
Investment Professionals, Inc.: Censured; Fined $40,000; Required to amend or supplement its written supervisory procedures to adopt additional procedures designed to prevent unauthorized changes of address for customer accounts and to prevent changes of address that were not in compliance with the firmís prohibitions,restrictions, procedures or policies.
failed to record and maintain the time of receipt for customer orders on brokerage order memoranda, and mismarked trades as solicited or unsolicited;
did not preserve instant message communications in connection with the firmís securities business;
failed to establish,maintain and enforce a supervisory system, including written supervisory procedures with respect to supervision of registered representativesí and other associated personsí activities; trading, including order tickets, order entry, best execution and trade review; review and retention of instant messages; and branch office activities;
had a deficient supervisory system regarding trades passing through the firmís inventory account, and was unable to readily identify and match off setting transactions related to particular customer orders requiring multiple executions, and consequently, was unable to compare, and did not compare, the customerís price to the firmís costs to ensure than any markups or markdowns were fair and reasonable. (Since the firm did not capture and record when orders were received, it was unable to adequately review the quality of the executions of its customer orders, and failed to ensure that it accurately reported its trading capacity to the TRF).
Legend Merchant Group, Inc: Censured; Fined $150,000; Required to certify that it has reviewed the adequacy of its
procedures regarding recording and maintaining required memoranda of customer orders, including, but not limited to, times of receipt of orders; ensuring that order memoranda are accurate, including, but not limited to, designations of orders as solicited or unsolicited; preservation and review of electronic correspondence; each area of the firmís business; ensuring, in connection with transactions passing through the firmís inventory account that sales charges are fair and reasonable based on the firmís contemporaneous costs, the quality of the executions of customer orders, including the timeliness of executions, and that the firm correctly reports its trading capacity to the TRF; clear delegation of supervisory responsibilities and reviews to ensure the supervisors are performing their assigned responsibilities, including, but not limited to, with respect to trading, including supervisory review of order tickets, order entry, and best execution, review of electronic correspondence, including, but not limited to, instant messages, and branch office and non-branch office activities; established systems and procedures reasonably designed to achieve compliance with applicable securities laws, regulations and FINRA rules concerning the aforementioned activities.
Scott & Stringfellow, LLC AWC/2006004160701/November 2009
failed to register individuals who acted in a supervisory capacity with respect to its investment banking or securities business in the appropriate registration category;
failed to provide written notification disclosing to its customers either its correct capacity in transactions or that transactions were executed at an average price;
made publicly available a report on its routing of non-directed orders in covered securities that contained incorrect information as to routing venues;
made available a report on the covered orders in national market system securities that it received for execution from any person which included incorrect information;
failed to report transactions in TRACE-eligible securities to TRACE within 15 minutes of the execution time, and incorrectly reported long sale transactions as short sale transactions to the NASDAQ Market Center.
Also, the Firm's supervisory procedures failed to include the date that each designated supervisory personnel assumed responsibility for each area of supervision, and its supervisory system did not provide for supervision reasonably designed to achieve compliance with applicable securities laws, regulations and FINRA rules concerning registration and TRACE.
Scott & Stringfellow, LLC: Censured, Fined $72,500 and Required to revise its written supervisory procedures regarding the date that each designated supervisory personnel assumed responsibility for each area of supervision, as well as registration and TRACE.
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