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FSC Securities Fined by FINRA for Failure to Supervise Third-Party Check Requests

FSC Securities Corporation has been fined $200,000 by the Financial Industry Regulatory Authority (FINRA) for failing to supervise third-party check requests in connection with an employee’s fraudulent investment fund memberships, which ultimately caused the investors to suffer significant losses.

According to FINRA, FSC Securities failed to establish, maintain and enforce an appropriate supervisory system to review third-party check requests related to 15 customers’ accounts.  These customers were sold memberships in an unapproved fund (the PFG Fund) by a registered representative of the firm who submitted 23 Letters of Authorization (LOAs), authorizing the issuance of approximately $1.6 million in third-party checks from FSC Securities accounts to a bank account controlled by the ill-fated fund.  The PFG fund ultimately collapsed and lost millions of dollars due to speculative trading and other investments.

FINRA found that FSC Securities failed to conduct adequate supervision of third-party check requests which came from a single branch office and approved the transmittal of nearly $1.6 million of customer funds to the PFG Fund.  Unfortunately, the investors suffered significant losses.  Without admitting or denying the findings, FSC Securities consented to FINRA’s sanctions and was censured and fined $200,000.

FINRA rules require brokerage firms to establish and implement a reasonable supervisory system to protect customers from the risks associated with investing. The implementation of the rules requires supervisors to monitor their employees to ensure compliance with federal and state securities laws, securities industry rules and regulations, as well as the brokerage firm’s own policies and procedures. If broker-dealers and their supervisors fail to establish and implement these protective measures, they may be held liable to account holders for investment losses which stem from their employees’ misconduct. Therefore, investors who have suffered losses due to a brokerage firm’s failure to supervise can bring forth claims to recover damages against firms like FSC Securities, which have a duty to supervise employees in order to protect their customers’ interests.

Have you suffered losses in your FSC Securities investment account?  Did you purchase an investment which was unsuitable in light of your investment goals?  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 FSC Securities stockbrokers who may have engaged in misconduct and caused investors losses.

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 visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.