A broker-dealer settled FINRA charges for failing to adequately supervise and keep records for one of its registered representatives' private securities transactions.
In a Letter of Acceptance, Waiver, and Consent, FINRA found that one of the broker-dealer's registered representatives communicated his intent to form a special purpose vehicle for investment purposes and sought clarification as to what form he should fill out to disclose the activity. FINRA stated that the representative described the activity to the broker-dealer as a passive investment. According to FINRA's findings, upon inquiring further, the broker-dealer became aware that the special purpose vehicle was intended to pool investments for other individuals whom the registered representative characterized as "friends and family."
FINRA stated that the broker-dealer thereafter approved the activity without requesting additional documents regarding the investment, and did not oversee the investment or modify the representative's Form U4. FINRA found that the broker-dealer erroneously determined that the activity was not a private securities transaction and, therefore, failed to follow its own written supervisory procedures for the approval, recordkeeping and supervision of private securities transactions.
As a result of its findings, FINRA determined that the broker-dealer violated FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade"), 3110 ("Supervision") and 3280(c) ("Transactions for Compensation").
To settle the charges, the broker-dealer agreed to (i) a censure and (ii) a $15,000 fine.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
