The Financial Industry Regulatory Authority (FINRA) recently announced that it has fined Citigroup Global Markets, Inc. $3.5 million for providing inaccurate mortgage performance information, supervisory failures and other violations in connection with subprime residential mortgage-backed securitizations.
Continue ReadingRBC Capital Markets, LLC recently submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $25,000.
Continue ReadingThe new FINRA rule 2111 clarifies the suitability standard as follows:
Continue ReadingThe Financial Industry Regulatory Authority (FINRA) reported that fines for false advertising have more than quadrupled from $4.75 million in 2010 to $21.1 million in 2011. FINRA found that a big part of that problem involved inaccurate or fraudulent internal communications. Firms were misleading their own brokers by telling them that structured products and other securities were not risky when, in fact, they were very risky. The brokers would then unintentionally mislead their customers by passing along the false information supplied by their firms.
Continue ReadingBoth the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have issued an alert to investors titled Structured Notes with Principal Protection: Note the Terms of Your Investment. The alert contains information pertaining to how principal protected notes are structured and the risks associated with investing in them. A few examples of what the SEC and FINRA want investors to know about principal protected notes is that they can have complex payout structures, principal lockup periods, and caps on returns. Most importantly, they want investors to know that principal protection is sometimes limited to just 10% of the original investment, and payment will depend on the financial strength of the issuing institution.
Continue ReadingThe Financial Industry Regulatory Authority (FINRA) announced plans to file enforcement actions against certain brokerages in connection with unsuitable sales of leveraged and inverse leveraged exchange-traded funds (ETFs), as well as for failure to train their brokers who sell them (see Reuters article by Suzanne Barlyn and Jessica Toonkel entitled “FINRA to bring cases over leveraged, inverse ETFs”). The article cites former FINRA Enforcement Chief Bradley Bennett as the source of this information, and notes that he refused to identify the broker-dealers that FINRA plans to sue. Bennett reportedly told lawyers at a Practising Law Institute (PLI) seminar in New York that the enforcement actions will “make statements” about how broker-dealers should ensure that registered representatives are properly trained about these complex products and the types of customers for whom they may or may not be suitable.
Continue ReadingSummit 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 ReadingThe 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 ReadingAmeriprise 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 ReadingHouston, 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.
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