Crown Capital in Orange, California, submitted a Letter of Acceptance, Waiver, and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which the firm was censured and fined $75,000 for allegedly failing to establish and maintain a supervisory system, including written supervisory procedures, for reviewing and monitoring mutual fund switches conducted by representatives in violation of NASD Rule 3010(a), NASD Rule 3010(b), and FINRA Rule 2010.
Crown Capital is a dually registered broker-dealer and investment advisor and has been a member of FINRA since July 5, 1999. According to the FINRA findings, Crown Capital had no supervisory mechanism in place and relied upon the registered representative to alert the firm of a mutual fund switch, which two representatives failed to do. The findings stated that one representative effected 61 short-term mutual fund switch transactions in a customer’s accounts which resulted in unnecessary front-end sales loads of between 3.75 and 5.75% with each new purchase and losses of approximately $5,000. During the same period, the other representative effected 49 Class A and two non-Class A short-term mutual fund switch transactions for four customers which also resulted in paid front-end sales loads of between 3.75 and 5.75% with each new purchase and losses of approximately $390,000. In addition to the findings, Crown Capital voluntarily compensated the customers who sustained losses due to the unsuitable recommendations, paying a total of approximately $395,000 in restitution.
NASD Rule 3010(a) requires member firms to establish and maintain a system to supervise the activities of registered representatives, registered principals and other associated persons that is reasonably designed to achieve compliance with applicable securities laws and regulations and with applicable NASD and FINRA Rules. NASD Rule 3010(b) further required member firms to establish, maintain and enforce written supervisory procedures (“WSPs”) reasonably designed to supervise associated persons and ensure their compliance with applicable securities laws and regulations and NASD and FINRA rules. Violations of NASD Rule 3010 were also violations of FINRA Rule 2010, which requires a member, in the conduct of its business, to observe high standards of commercial honor and just and equitable principles of trade.
Stockbrokers have been known to engage in many practices that may violate industry and firm rules, practices, and procedures. In order to protect investors from stockbroker misconduct, FINRA rules require brokerage firms to establish and implement a supervisory system. The implementation of these industry rules requires supervisors to monitor their employees to ensure compliance with federal and state securities laws, securities industry rules and regulations, and the brokerage firm’s own policies and procedures. If broker-dealers and/or their supervisors fail to establish and implement these protective measures, they may be liable to investors for damages which flow from the broker’s misconduct. Therefore, investors who have suffered losses stemming from failure to supervise, unsuitable recommendations and/or other misconduct by their broker can file claims to recover damages against broker-dealers, like Crown Capital, which should consistently oversee its brokers’ activities in order to prevent the above-described misconduct.
Have you suffered losses in your Crown Capital account due to their failure to supervise and/or unsuitable recommendations by your broker? 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 Crown Capital stockbrokers who may have engaged in broker 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 40 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 email@example.com for answers to any of your questions about this blog post and/or any related matter.