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TAG | failure to establish due diligence policies for brokerages

May/12

22

Does Your Broker/Dealer Know Exactly What He Is Selling?

Comments off · Posted by Securities Lawyer in FINRA

In a May 21, 2012 article from the InvestmentNews.com website, Bruce Kelly writes that the SEC is looking at “several areas of high risk” in the securities industry.

Some of the areas they are looking into  include broker-dealer due diligence, net capital levels at broker-dealers and “dark pools” of liquidity, said Julius Leiman-Carbia, associate director in charge of the National Broker-Dealer Examination Program in the SEC’s Office of Compliance Inspections and Examinations.

The definition of a dark pool is a source of liquidity that is nondisplayed, meaning  that  it does not publicly disseminate quotes, according to PriceWaterhouseCoopers LLC. Trading volume of U.S. stocks through dark pools has increased in recent years.

“We’re looking at due diligence,” Mr. Leiman-Carbia said in a panel discussion Monday afternoon at the annual meeting of the Financial Industry Regulatory Authority Inc. in Washington. He said he wonders if brokers truly understand all the products that they are selling.

Kelly writes that the SEC is also focusing on “the division between the investment adviser and broker-dealer sides” of firms that are dually registered, including “what types of controls are in place when money is [placed with] the investment adviser,” Mr. Leiman-Carbia said. Is there a good reason why it’s there, other than the firm can make money this way, he asked.

The SEC is also looking at firms’ levels of net capital, which each broker-dealer must maintain in order to stay open for business. And the commission also is trying to pinpoint investor fraud, Mr. Leiman-Carbia said. Indeed, the SEC is looking at the country as a whole to identify particular areas where fraud is prevalent, he said. One benefit would be to locate regions where senior citizens are defrauded writes Kelly in the InvestmentNews.com article.

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide.
For a free consultation with an attorney, please call 888-760-6552, or visit our website at: http://www.securitieslawyer.com.

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May/12

15

Orlando Rep Fined and Suspended by FINRA

Comments off · Posted by Securities Lawyer in FINRA

John Brian Busacca III (CRD #2302780, Registered Principal, Orlando, Florida)

was fined $30,000 and suspended from association with any FINRA member in any principal capacity for six months. The SEC sustained the sanctions following appeal of a NAC decision. The U.S. Court of Appeals denied Busacca’s petition for review.
 
The sanctions were based on findings that Busacca failed to reasonably supervise the firm’s operations system conversion and its operations activities to detect and/or prevent certain violations, including, but not limited to, inaccurate box counts, erroneous records of customer securities, failure to timely validate or take exception to transfer instructions, failure to make timely buy-ins, failure to timely liquidate unpaid-for customer securities positions in cash accounts in violation of Regulation T of the Federal Reserve Board, violation of margin requirements as prescribed by NASD Rule2520(c), and failure to report data to FINRA.
 
The findings stated that Busacca failed to reasonably supervise the firm’s operations considering his extensive travel and focus on business development despite his knowledge of the firm’s significant operational problems, the lack of adequate personnel in place to address the firm’s problems, and Busacca’s failure to diligently and promptly address all of the firm’s operational issues.
 
The findings also stated that Busacca, acting on his member firm’s behalf as its president, employed an unregistered CCO.
The suspension is in effect from April 16, 2012, through October 15, 2012.
(FINRA Case #E072005017201)
This information was obtained from FINRA’s website.
 
Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide.
For a free consultation with an attorney, please call 888-760-6552, or visit our website at: www.securitieslawyer.com.
 
 

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