Failure to Supervise - Law Offices of Robert Wayne Pearce

Mar 2, 2020

Summit Brokerage Fined for its Failure to Supervise

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.

Feb 11, 2019

Former BlackBook Supervisor Suspended for Failure to Supervise

Franklin Ihendu Ogele of Hillside, New Jersey submitted a Letter of Acceptance, Waiver and Consent (AWC) in which Ogele was fined and suspended by the Financial Industry Regulatory Authority (FINRA) for allegedly failing to supervise in violation of NASD Rule 3010 and FINRA Rules 3110 and 2010. In May 2004, Ogele joined BlackBook Capital, LLC. During the relevant period, he was registered as BlackBook’s Chief Executive officer and Chief Compliance Officer. The findings stated that Ogele was responsible for supervising a representative who was the top-producing broker in the firm’s branch. According to FINRA, Ogele failed to supervise the trading activities of the representative and instead permitted him to self-supervise his own activities. FINRA stated that the representative’s trading in the customer’s account incurred significant losses and a cost-to-equity ratio and turnover rate that should have resulted in an investigation by Ogele.

Aug 7, 2017

WFG Investments Fined by FINRA for Failure to Supervise Unsuitable Trading

WFG Investments, Inc. has submitted a Letter of Acceptance, Waiver, and Consent (AWC) in which it has been fined $150,000 by the Financial Industry Regulatory Authority (FINRA) for failing to supervise its registered representative’s unsuitable trading despite numerous red flags. WFG Investments is headquartered in Dallas, Texas and currently has approximately 237 registered representatives and 118 branch offices. FINRA found that WFG Investments failed to appropriately supervise the sales practices of a registered representative who had engaged in unsuitable trading in his customers’ accounts by overconcentrating them in low-priced securities. For example, FINRA found that during 2012, the WFG representative’s account purchases were 66% low-priced securities. In 2013, FINRA’s findings state that the account purchases were 80% concentrated in these securities and/or illiquid and highly speculative private placement and REIT investments.

Aug 2, 2017

Summit Equities Fined for Variable Annuity Supervisory Failures

Summit Equities, Inc., submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which it was fined $325,000 for failing to adequately supervise its registered representatives’ recommendations and sales of multi-share-class variable annuities. Registered with FINRA since 1982 and headquartered in Parsippany, New Jersey, Summit Equities has approximately 132 registered representatives. FINRA found that from October 2011 to December 2015 (the relevant time period), Summit Equities sold 1,037 individual variable annuity contracts to its customers. Approximately 45% of those contracts were L-share contracts. FINRA found that Summit Equities failed to provide its registered representatives with proper training and guidance on suitability considerations for these variable annuities, which provide a shorter surrender period than B-share contracts, but have a higher fee in exchange for the increased liquidity. Without admitting or denying the FINRA findings, Summit Equities was censured and assessed a $325,000 fine.

Jul 14, 2017

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.

Feb 18, 2015

Popular Securities Fined By FINRA for Failure to Supervise Puerto Rico Bond Fund Investments

Popular Securities, Inc. n/k/a Popular Securities, LLC, was fined $125,000 by the Financial Industry Regulatory Authority (FINRA) for failure to supervise violations involving over-concentration of investments in Puerto Rico municipal bonds and closed-end bond funds in many of its customers’ accounts. Without admitting or denying the findings, Popular consented to the sanctions and to FINRA’s findings that between July 1, 2011 and June 30, 2013, it failed to supervise its customers’ Puerto Rico bond fund investments, even after the bond rating had been downgraded to junk bond status. Following the junk bond downgrade, FINRA found that Popular Securities’ customers continued to purchase concentrated positions of the Puerto Rico securities.

Jan 13, 2015

Former LPL Financial and Financial Network Stockbroker Robert Mangold Suspended by FINRA

Robert Charles Mangold, a former registered representative with Financial Network Investment Corporation (Financial Network) and LPL Financial LLC (LPL) submitted a letter of acceptance, waiver, and consent in which he consented to, but did not admit to or deny, the Financial Industry Regulatory Authority’s (FINRA) sanction and findings that he solicited and received $56,000 in loans from two customers.

Dec 5, 2014

Parkland Securities Fined $100,000 By FINRA for Numerous Failure to Supervise Violations

Parkland Securities, LLC (Parkland) f/k/a Sammons Securities Company, LLC, was fined $100,000 by the Financial Industry Regulatory Authority (FINRA) for numerous failure to supervise violations. Without admitting or denying the findings, Parkland consented to the sanctions and to FINRA’s findings. FINRA found that Parkland relied too heavily upon an outside entity with a limited number of persons to conduct all of the supervisory and compliance functions for its 1,274 registered representatives and 854 branch offices. Also, FINRA found that Parkland’s system for reviewing its employees’ emails was inadequate, as was its system for the supervision of its customers’ confidential information, such as ensuring its representatives were using passwords, anti-virus software and anti-spyware tools.

Oct 30, 2014

Merrill Lynch Fined $6 Million for Short Selling and Supervisory Violations

The Financial Industry Regulatory Authority (FINRA) has fined Merrill Lynch $6 million for Regulation SHO (Reg SHO) violations and failures to supervise. According to FINRA’s announcement on October 27, 2014, it censured and fined Merrill Lynch Professional Clearing Corp. (Merrill Lynch PRO) $3.5 million for violating Reg SHO, which is an SEC rule governing short sales and aimed at preventing abusive naked short selling. Additionally, FINRA also censured and fined Merrill Lynch, Pierce, Fenner & Smith Inc. (Merrill Lynch) $2.5 million for inadequate supervisory practices. According to FINRA, from September 2008 through July 2012, Merrill Lynch PRO failed to take action to close out certain fail-to-deliver positions, as required under Reg SHO. Further, Merrill Lynch PRO did not have appropriate systems and procedures in place to address the Reg SHO close-out requirements during most of the time period.