CV Brokerage in Williamstown, New Jersey submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which the firm was censured and fined $100,000 for allegedly failing to establish and maintain a supervisory system, and written supervisory procedures (WSPs) reasonably designed to achieve compliance with applicable FINRA rules regarding the participation of Firm-registered representatives in private securities transactions in violation of FINRA Rules 3110(a) and (b), 3280, and 2010.
According to the FINRA findings, a General Securities Principal with CV Brokerage, engaged in outside business activities and unapproved private securities transactions (PSTs). The FINRA findings stated that the representative formed an investment fund away from CV Brokerage and received substantial compensation from the transactions between multiple financial institutions and exchanges. During the same period, the WSPs permitted the representative to supervise her own compliance with the PSTs. CV Brokerage could have hired other principals to review or disapprove her participation in the PSTs but failed to do so. In addition, CV Brokerage allegedly failed to supervise the representatives participation in the PSTs, failed to supervise the securities trading conducted by the investment fund as if it was executed by the firm and failed to record the securities transactions for the fund on the Firm’s books and records.
FINRA Rule 3110(a) requires each member firm to “establish and maintain a system to supervise the activities of each associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA rules.” FINRA Rule 3110(b)(1) states that “each member shall 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 applicable FINRA rules.” FINRA Rule 3280(c) requires that after a member firm has received written notice of an associated person’s proposed participation in a PST in which the associated person has received or may receive selling compensation, the firm must approve or disapprove the person’s participation in writing. If the member firm approves the associated person’s participation in the PST, the firm must record the PST on the firm’s books and records and “supervise the person’s participation in the transaction as if the transaction were executed on behalf of the member.” The Rule defines a PST as “any securities transaction outside the regular course or scope of an associated person’s employment with a member firm.
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 the failure to supervise or other misconduct by their broker can file claims to recover damages against broker-dealers, like CV Brokerage, which should consistently oversee its brokers’ activities in order to prevent the above-described misconduct.
Have you suffered losses in your CV Brokerage account due to their failure to supervise? 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 CV Brokerage 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 firstname.lastname@example.org for answers to any of your questions about this blog post and/or any related matter.