I took a quick read through FINRA's monthly report of disciplinary actions, for actions reported for December 2012 this morning. We see many typical violations, including trade reporting actions, Form U4 disclosure cases, outside business activity violations and some of the typical conversion of funds cases. A few cases stood out as one for me to highlight.
A CCO submitted an AWC agreeing to be suspended for one month and fined $5000 based on findings that the CCO permitted an individual to function as a principal without being registered as a principal. The CCO was apparently this person's supervisor, and the individual had responsibility for reviewing and approving the firm's WSP, annual certifications, net capital computations, reviewing correspondence and hiring and training registered reps. Case No. 2009020534802. I think the lesson here is obvious: firms need to check to ensure folks are properly registered.
In case 2011025562401, a firm was fined $20,000 (the fine was apparently reduced due to the firm's size, revenues and resources) based on findings that it failed to maintain and preserve certain business related emails sent to its Bloomberg terminal. FINRA also found that the firm did not have WSPs in place for retention of electronic correspondence to its Bloomberg terminal. The lesson here: don't just focus on emails through the firm's domain or email system. You have to look at other places in the firm where communications/correspondence can be received and ensure that the appropriate review and retention policies are in place for those sources as well.
Also in December, FINRA's National Adjudicatory Council issued a decision in case 201002379601 (12/10/12). A hearing panel had barred a representative who they found to have submitted a falsified reimbursement request to his firm. On appeal to the NAC, the NAC affirmed the findings of violation, but modified the sanctions, removing the bar and suspended the rep. for 6 months and fining him $5000. The NAC also assessed costs. In modifying the sanctions, the NAC seemed to give great credit to the rep.'s statements of remorse along the lines of He's terribly sorry this ever happened, really very sorry about it and it won't happen again, etc. The NAC also distinguished this case as not a case of conversion of funds but a case of falsification of documents, as I read it. The NAC found that the rep. fabricated a hotel receipt and verification letter and submitted those docs to his firm for reimbursement for which was not not entitled. It is, in my view, an interesting decision and I expect the rep. and his lawyer would be very happy about the outcome. Not too many times is a bar dropped to a 6 month suspension.