Articles Posted in FINRA News

Summit Brokerage submitted a Letter of Acceptance, Waiver, and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which they failed to review its representatives business and enforce supervisory procedures violating FINRA Rules 3110 and 2010.

FINRA Rule 3110(b) requires each member firm to “establish, maintain, and enforce written procedures to supervise the types of business in which it engages and the activities of its associated persons that are reasonably designed to achieve compliance with applicable securities laws and regulations, and with the applicable FINRA rules.” FINRA Rule 3110(b)(4) requires, among other items, that firms have written procedures for the review of incoming and outgoing written (including electronic) correspondence, and that such reviews be conducted by a registered principal and evidenced in writing. Violations of FINRA Rule 3110 also are violations of FINRA Rule 2010. Continue Reading

The Financial Industry Regulatory Authority (FINRA) announced today that it ordered Morgan Stanley Smith Barney LLC (Morgan Stanley) to pay $13 million in fines and restitution for failing to supervise the sales of unit investment trusts (UITs).

FINRA found that from January 2012 through June 2015, hundreds of Morgan Stanley brokers executed short-term UIT rollovers in thousands of customer accounts.  Further, FINRA found that Morgan Stanley failed to adequately supervise its representatives’ sales by failing to provide sufficient guidance or training to detect unsuitable short-term UIT trading.  Continue Reading

Ameriprise Financial Services, Inc. (Ameriprise) submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) for alleged supervisory failures in connection with wire transfers from customer brokerage accounts and the resulting conversion of over $370,000 by one of its registered representatives.

Ameriprise is headquartered in Minneapolis, Minnesota and employs nearly 14,000 registered representatives in approximately 3,800 branch offices.  FINRA found that from October 2011 to September 2013, a registered representative, working as an office manager, converted more than $370,000 from five Ameriprise customers.  The customers happened to also be the registered representative’s family members, including his mother, step-father, grandparents and domestic partner.  FINRA’s findings state that the Ameriprise employee’s conversion, which occurred via nine wire transfers, went undetected for two years by Ameriprise.  Continue Reading

Houston, Texas-based VALIC Financial Advisors, Inc. (VALIC) was hit with a $1.75 million fine by the Financial Industry Regulatory Authority (FINRA) for failing to prevent compensation conflicts.  VALIC is alleged to have incentivized its registered representatives to sell its own annuities and discouraged them from selling non-proprietary products.

FINRA found that from October 2011 to October 2014, VALIC failed to maintain a reasonable supervisory system to address the potential conflicts of interest created by its compensation policy, which incentivized its representatives for recommending that customers move funds from VALIC variable annuities to the firm’s fee-based platform or a VALIC fixed index annuity.  Further, FINRA found that VALIC made the compensation conflict worse by prohibiting its representatives from receiving compensation when moving customer funds from a VALIC variable annuity to a non-VALIC variable annuity, mutual fund or other non-VALIC product. Continue Reading

H.D. Vest Investment Securities, Inc. dba H.D. Vest Investment Services (H.D. Vest) of Irving, Texas submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for allegedly failing to timely and/or accurately report customer complaints, and failing to adequately supervise variable annuity transactions to be sure the products were suitable for customers.

FINRA alleges that during the period September 2012 through July 2015, H.D. Vest failed to accurately and/or timely report seven customer complaints in FINRA’s 4530 Complaint Reporting System.  According to FINRA, H.D. Vest failed to accurately report three customer complaints by failing to select the most egregious problem code; identifying the wrong registered representative in its reporting of another customer complaint; and failing to timely report an initial customer complaint. Continue Reading

Shearson Financial Services, LLC (SFS) of Boca Raton, Florida submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for allegedly maintaining inaccurate books and records.

FINRA investigators found between June 10,2013 through October 6,2015, SFS maintained inaccurate books and records reflecting that 1,873 transactions were unsolicited, when in fact, the transactions were solicited, in violation of FINRA Rules 451 1(a), 2010, and Section 17(a) and SEC Rule 17a-3 of the Securities Exchange Act. In addition, during this period, SFS, acting through 15 registered representatives, exercised discretion in 231 transactions in 56 customer accounts, without written authorization from the account holders, in violation of NASD Rule 2510(b) and FINRA Rule 2010.

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David Miller of Columbus, Ohio was named Respondent in a Financial Industry Regulatory Authority (FINRA) complaint that alleged he made negligent misrepresentations and omissions of material fact in connection with customers’ purchases of UITs. FINRA alleged that Mr. Miller recommended 140 UIT purchases totaling over $5.3 million in 129 customer accounts without having a reasonable basis to make the recommendations, in violation of FINRA Rules 2111 and 2010.

From June 2008 through August 2013, Mr. Miller was registered as a General Securities Representative (GSR) with The Huntington Investment Company (Huntington), the broker-dealer affiliate of The Huntington National Bank (Huntington Bank). The FINRA complaint originated after Huntington filed a Form U5 on August 27, 2013, disclosing that Mr. Miller had “violated industry standards of conduct.” Upon investigation, FINRA found that Mr. Miller engaged in a pattern of recommending unsuitable UITs without having a reasonable basis for the recommendations, causing his customers to lose a total of $1,019,656.83.

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James Scullin of Miami, Florida submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for allegedly placing an unauthorized trade in a customer’s account in violation of FINRA Rule 2010. Mr. Scullin was a general securities representative for FINRA member firm UBS Financial Services (UBS) from June 2011 through November 2014.

FINRA Rule 2010 reads that “a member, in the conduct of his business, shall observe high standards of commercial honor and just and equitable principles of trade.” In mid-2011, Mr. Scullin became a registered representative at UBS for the account of a firm customer. FINRA investigators found that on or about September 12, 2014, Mr. Scullin placed a $5,000,000 trade without informing the two individuals with authority to place trades in the customer account or seeking their authorization. Mr. Scullin did not have discretionary authority for any of the customer’s accounts.

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Michael DeBoer of Trinity, Florida submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for allegedly not disclosing his participation in a transaction that recommended customers make an unsuitable securities transaction. Mr. DeBoer was registered with former FINRA member firm Dalton Strategic Advisors Investment Services Inc. (Dalton Strategic) from November 2009 to April 2013.

In June 2010, while registered with Dalton Strategic, Mr. DeBoer recommended that two customers invest a total of $200,000 in securities offered by a software development company. Mr. DeBoer received $32,000 in commissions for the securities transaction. However, the investors ultimately lost the entirety of their investments in the securities. FINRA alleged the securities were not offered through Dalton Strategic, and Mr. DeBoer did not disclose his participation in the transactions to his associated firm. FINRA further alleged that before making his recommendation, Mr. DeBoer also failed to reasonably investigate the software company or its securities and therefore lacked a reasonable basis to believe the securities were suitable investments for his clients.

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