Fox Financial Management Corporation (Fox Financial) of Carrollton, Texas, Brian Murphy of Frisco, Texas and James Rooney of Carrolton, Texas were all fined and suspended by the Department of Enforcement for the Financial Industry Regulatory Authority for allegedly failing to supervise a registered representative and for failing to establish, maintain and enforce written supervisory procedures.
Fox Financial’s primary business was selling private placements in real estate investment trusts (REITs) and life insurance settlement funds (viaticals) issued by a Fox Financial affiliate. Rooney and Murphy were both General Securities Principals and General Securities Representatives. Rooney was the firm’s President from 2005 until Fox Financial ceased to be a FINRA member. Murphy was Fox Financial’s Chief Compliance Officer (CCO) from 2008 until Fox Financial ceased to be a FINRA member. Rooney and Murphy shared supervisory responsibilities for Fox Financial registered representatives.
FINRA’s allegations are that Rooney and Murphy both made an “erroneous” decision to treat a registered representative’s activities outside of Fox Financial that included RIA’s and hedge funds as “outside business activities” and not private securities transactions. Registered Representatives must provide written notice to their firm of their outside business activities.
In July 2008, a Registered Representative of Fox Financial completed a Fox-prepared form entitled “Outside Activity Approval.” Upon receiving the form, the firm (Fox Financial) will approve or disapprove the requested activity and thereafter track all outside business activities. The form indicated his business was as a Registered Investment Advisor and that he was receiving compensation in the form of “client fee’s and money managers’ fees.”
On the day the form was submitted, Murphy approved of the representative’s outside business activities. Rooney was aware of the form and had no objections. FINRA alleges that Murphy and Rooney did not conduct an independent investigation into the types of compensation, the representative’s customers, and did not ascertain the nature of the business beyond what was on the “Outside Activity Approval Form.” FINRA found that Murphy and Rooney approved three outside activity forms without conducting a proper investigation into the business activities.
FINRA found that Fox, Rooney, and Murphy violated FINRA Rule 2010 by failing to supervise a registered representative’s private securities transactions and failing to record the transactions on the firm’s books and records. In addition, FINRA found that the Respondents violated FINRA Rule 2110 by failing to establish, maintain, and enforce written supervisory systems and procedures.
For the above allegations, Fox Financial Management Corporation was expelled from FINRA membership and fined $100,000. Murphy was fined $25,000 and suspended from association with any FINRA member in any capacity for three months. Rooney was fined $50,000 and suspended from association with any FINRA member in any capacity for a period of six months.
Stockbrokers have been known to engage in many types of practices which violate industry and firm rules, practices, and procedures. In order to protect customers from stockbroker misconduct, FINRA rules require broker-dealers like Fox Financial Management Corporation to establish and implement a reasonable supervisory system. The implementation of the rules require supervisors to monitor employees to ensure they comply with federal and state securities laws, securities industry rules and regulations, and the firm’s own policies and procedures. If broker dealers and/or their supervisors do not establish and implement these protective measures, they may be liable to investors for damages which flow from the misconduct. As a result, investors who have suffered losses because of their stockbroker’s unlawful or prohibited conduct can file a claim to recover damages against broker dealers like Fox Financial Management Corporation, which should consistently oversee its employees in order to prevent stockbroker misconduct.
Have you suffered losses in your Fox Financial Management Corporation investment account due to your stockbroker’s misconduct? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against stockbrokers for unsuitable recommendations, misrepresentations, and/or other unauthorized and prohibited conduct.
The most important of investors’ rights is the right to be informed! This Investors’ Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 35 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities, and investment law issues. The lawyers at our law firm are devoted to protecting investors’ rights throughout the United States and internationally! Please post a comment, call (800) 732-2889, send Mr. Pearce an email at email@example.com, and/or visit our website at www.secatty.com for answers to any of your questions about this blog post and/or any related matter.