TAG | Firm failure to supervise broker
Comments off · Posted by Securities Lawyer in FINRA
Success Trade Securities, Inc. (CRD #46027, Washington, DC) and
Fuad Ahmed (CRD #2404244, Registered Principal, Washington, DC)
submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $100,000. Ahmed was fined $10,000, suspended from association with any FINRA member in any principal capacity for 60 days, and must complete 16 hours of continuing education related to AML compliance in a program acceptable to FINRA. The training must be completed within six months after the issuance of this AWC. Within 30 days following completion of the training, Ahmed must provide FINRA with written proof of completion.
Without admitting or denying the findings, the firm and Ahmed consented to the described sanctions and to the entry of findings that the firm and Ahmed, the firm’s president, CEO, CCO, AML compliance officer (AMLCO) and financial and operations principal (FINOP), did not implement an adequate customer identification program (CIP). The findings stated that out of a sample of accounts, the firm could not produce any customer information, and in fact, did not have an account record at all (such as a new account form) for some of the accounts. The firm could also not evidence that it had verified the identity of these accounts. For the accounts that did have proper identification paperwork, some of the customer identification paperwork provided to the firm and placed in the customer files was completely illegible. The findings also stated that there was little to no surveillance of accounts for suspicious activity. The firm did not utilize any exception reports. Ahmed obtained and manually reviewed biweekly reports from his clearing firm that included all incoming and outgoing wire activity at the firm for a two-week period, but were not conducive to detecting any patterns or to identifying exceptions. The findings also included that although Ahmed initialed the reports, there wasn’t a date to evidence that the reports were reviewed in a timely manner, and there weren’t any notes or other documents to indicate he had reviewed or looked into any wires. Ahmed sampled and reviewed firm accounts on a monthly basis, but did not do so based on a relevant assessment of risk.
The account review did not include customer accounts and was delegated to another principal of the firm who did not understand the review he was supposed to undertake and, therefore, did not conduct any meaningful review.
FINRA found that the firm’s procedures outlined red flags that required a follow-up review. These included transactions that lacked a business purpose, customers with questionable backgrounds, customers that exhibited a lack of concern for transaction costs, customers maintaining multiple accounts for no apparent reason, unexplained wire activity, wires to countries presenting a money-laundering risk, deposits followed by requests to withdraw the funds without apparent purpose, and inflows of funds beyond the customer’s known resources. FINRA also found that the firm did not follow up on any of the red flags noted in its AML compliance program (AMLCP), did not maintain a list of high-risk customers, and did not monitor a sufficient amount of account activity to permit identification of patterns of unusual size, volume, geographic factors, etc. The firm and Ahmed failed to detect and follow up on these red flags indicating that a customer might be engaging in improper and/or illegal activities. In addition, FINRA determined that the firm failed to maintain evidence that an AMLCP was approved in writing by a member of firm management as required. For two years, the firm AMLCP testing was patently inadequate. The test failed to review for suspicious activity, high-risk accounts, red flags or customer account verification; indicated that several areas were not applicable when they clearly were; failed to include an independent sample to ensure that the firm was conducting adequate reviews for AML activity; failed to identify any accounts that were missing customer identification verification; and failed to indicate that the firm was not utilizing any AML exception reports even though the clearing firm made available AML-related exception reports.
Also, FINRA found that in a year, the firm failed to conduct any independent testing of its AML program whatsoever. The firm failed to have an adequate training program for firm personnel with respect to AML issues for two years. Although a year’s annual compliance meeting superficially touched on AML, it was not adequately tailored to the firm’s business.
Furthermore, FINRA found that the firm conducted a securities business despite the fact that it failed to maintain its required minimum net capital. The firm failed to conduct accurate net capital computations and consequently maintained deficient net capital. The inaccurate computations were primarily due to inaccurate net capital treatment of a clearing firm deposit upon termination of the clearing relationship, improper booking of expenses and liabilities, and the firm’s failure to accurately classify allowable versus non-allowable assets. The findings also stated that because of these discrepancies, the firm failed to prepare an accurate general ledger and trial balance and quarterly Financial and Operational Combined Single (FOCUS) report for the quarters associated with the net capital deficiencies. As the firm’s FINOP, Ahmed was at all times responsible for ensuring that the firm complied with its net capital and books and records obligations, and therefore, caused the firm’s violations. The findings also included that during a sample review, the firm failed to report relevant customer complaints and failed to accurately and timely file some customer complaints.
FINRA found that the firm implemented material changes to its business model without obtaining prior FINRA approval; the firm engaged in municipal securities trades without obtaining the appropriate approval from FINRA. FINRA also found that the firm and Ahmed failed to establish and implement an adequate supervisory system and enforce its written procedures; the firm and Ahmed failed to maintain current information regarding Uniform Applications for Securities Industry Registration or Transfer (Forms U4) and Uniform Branch Office Registration (Forms BR), failed to obtain fingerprints when required to do so, and failed to prevent non-registered individuals from acting in a registered capacity. Unlicensed individuals had day-to-day responsibilities that required the firm to take their fingerprints, yet the firm failed to do so. In addition, FINRA determined that the firm and Ahmed failed to maintain advertising material, failed to timely file advertising material with FINRA Advertising Regulation, and failed to comply with the content standards for advertising material. Moreover, FINRA found that the firm failed to establish WSPs governing variable annuity (VA) exchanges.
Ahmed’s suspension is in effect from March 19, 2012, through May 17, 2012.
(FINRA Case #2009016309801)
Ahmed Success Trade Securities · AML compliance by brokers · AMLCP · b-d failing to meet standards in advertising · Brokerage inadequate customer identification of customers · compliance records for brokers · Customer Identification Program · failure to file FOCUS Reports · failure to keep account information by brokers · failure to supervise brokers · Financial Industry Regulatory Authority · Fines to brokerages for improper advertising · FINRA · FINRA arbitration · FINRA brokercheck · Finra enforces advertising · finra lawyer · finra securities arbitration · finra securities arbitration lawyer · Firm failure to supervise broker · fort lauderdale securities lawyer · Fuad Ahmed Washington DC · inadequate supervisory procedures by broker/dealers · inadequate training program for brokerages · Lars K. Soreide · Lars K. Soreide Soreide Law Group · securities lawyer · Soreide Law Group PLLC · Stock fraud lawyer · stockbroker misconduct · Success Trade Securities Inc
Comments off · Posted by Securities Lawyer in FINRA
Cantone Research Inc. (CRD® #26314, Tinton Falls, New Jersey) and Christine L. Cantone (CRD #2687618, Registered Principal, Thompson, Pennsylvania)
submitted an Offer of Settlement in which the firm was censured, fined $25,000, $10,000 of which was jointly and severally with Christine Cantone, and ordered to pay a total amount of $200,000 in partial restitution to customers, jointly and severally with Christine Cantone. Christine Cantone was suspended from association with any FINRA member in any principal capacity for three months.
Without admitting or denying the allegations, the firm and Christine Cantone consented to the described sanctions and to the entry of findings that Christine Cantone, as the firm’s vice president and chief compliance officer (CCO), failed to reasonably supervise a registered representative who was able to continue engaging in a scheme through which he sold fictitious investments to firm customers and misappropriated more than $1.6 million of their funds. Throughout the time of the registered representative’s association with the firm, Christine Cantone was aware of certain “red flags” that should have alerted her to the misconduct but failed to reasonably follow up on those indications of possible misconduct.
These findings stated that Christine Cantone was responsible for enforcing the firm’s procedures regarding the monitoring and review of employee transactions in outside accounts, and for reviewing incoming and outgoing paper and electronic correspondence for the firm’s registered representatives. The findings also stated that upon the registered representative’s association with the firm, he disclosed an account at another member firm. Christine Cantone asked him to transfer the account to the firm and he objected, citing several reasons, including that he needed to pay certain bills from the account.
Christine Cantone acquiesced and permitted the registered representative to retain his account at the other member firm. The findings also included that Christine Cantone regularly reviewed statements from the account, which alerted her to unusually large deposits in the account. Concerned that the registered representative might be engaging in outside business activities or private securities transactions, Christine Cantone questioned him about the origin of the funds but accepted the registered representative’s explanation that the deposits were related to real estate sales or to his relative’s supposed antique business, and did not request supporting documentation or make any other efforts to verify those representations.
FINRA found that even when presented with direct evidence of the registered representative’s deposit of customer funds into the account, Christine Cantone continued to rely on his unverified representations. As a result of Christine Cantone’s failure to supervise the representative, he was able to continue his misappropriation scheme unabated while registered at the firm. FINRA also found that although the firm had general procedures requiring the disclosure of outside brokerage accounts, the provision of duplicate statements for those accounts and the questioning of registered representatives about suspect transactions in those accounts, the written supervisory procedures (WSPs) lacked specific requirements, and the firm otherwise failed to provide for reasonable follow-up or review of such suspect transactions, such as requesting documentation on questionable transactions, comparing deposit activity in the outside accounts to withdrawal activity in customer accounts, or speaking with customers. As a result, the firm failed to establish and maintain a supervisory system and establish, maintain and enforce WSPs reasonably designed to achieve compliance with applicable securities laws and regulations with regard to monitoring the activity of its registered representatives in outside brokerage accounts.
Christine Cantone’s suspension is in effect from March 19, 2012, through June 18, 2012.
(FINRA Case #2009020383002)
broker failing to obtain firm's authorization · broker selling fictitious investments to customers · broker theft from customers · brokers recommending risky investments · Cantone Research Inc · Christine Cantone · Christine L Cantone FINRA sanction · failure to maintain supervisory system by brokerage · failure to supervise brokers · failure to supervise company policies · Financial Industry Regulatory Authority · FINRA arbitration · finra lawyer · finra securities arbitration lawyer · Firm failure to supervise broker · Ft. Lauderdale Securities Lawyer · high risk investments · investment fraud · Lars K. Soreide · Lars K. Soreide Soreide Law Group · risky investments · securities fraud lawyer · securities lawyer · Soreide Law Group PLLC · stock broker fraud · Stock fraud lawyer · stockbroker misconduct · Unsuitable investments to elderly
Comments off · Posted by Securities Lawyer in FINRA
In a March, 2012, article for Forbes, Bill Singer writes that for the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority (“FINRA”), without admitting or denying the findings, prior to a regulatory hearing and without an adjudication of any issue, AXA Advisors, LLC submitted a Letter of Acceptance, Waiver and Consent (“AWC”), which FINRA accepted. In the Matter of AXA Advisors, LLC, Respondent (AWC 2009020149901, March 13, 2012).
The Respondent AXA Advisors, LLC employs about 5,800 registered persons at 1,300 branch offices; and the firm is a subsidiary of AXA Financial, Inc. (a member of AXA Group). Respondent AXA conducts a general securities business, primarily engaged in the distribution of mutual funds, variable life insurance and variable annuity contracts. According to the AWC, Respondent AXA has no prior relevant disciplinary history.
Singer writes that the former Registered Representative Kenneth Neely was first registered in the securities industry in 1987 and affiliated with several FINRA member firms. By 2001, he was registered with UBS PaineWebber, Inc. and thereafter with Stifel, Nicolaus & Co., Inc.. Beginning in August 2007, Neely was employed at Respondent AXA’s Clayton, MO branch office. According to FINRA’s allegations, when Neely became associated with Respondent AXA in August 2007, he had been the subject of four customer complaints, including three arbitrations, concerning his business practices at prior employers. Additionally, Respondent AXA was aware that he was experiencing financial difficulties. The AWC alleges that in 2001, while employed at UBS, Neely began a Ponzi scheme, which he continued during his employ with Stifel and thereafter at Respondent AXA, where he induced that firm’s customers and others to participate in a fictitious “St. Louis Investment Club” and to invest in an equally fictitious real estate investment trust, the “St. Charles REIT.” Following his July 2009 termination by Respondent AXA for admittedly commingling and converting funds, FINRA entered into an AWC with Neely (AWC/20080157230901 /July 23,2009) whereby he was barred from the industry.
The Forbes article goes on to say that in April of 2008, during an annual audit of Neely, Respondent AXA reviewed Neely’s computer and discovered an Excel spreadsheet, which reflected a payment schedule for eight individuals. The AWC characterizes those individuals as having been induced by Neely to participate in his fraudulent scheme. This spreadsheet was titled “Statement of Accounts with Clients,” marked “Ken Neely,” listed Neely’s home address, and showed a total amount invested of $323,000. Additionally, the spreadsheet set out the initial amount each listed individual had invested and the amounts due in April 2008.
Silver writes that one of Respondent AXA’s examiners became suspicious about the spreadsheet and asked Neely to explain it. According to the AWC, in person and later in an email, Neely explained that a friend and potential client planned to start a business and needed advice on how to manage business finances. In response to that need, Neely claimed that he had used the spreadsheet to show his friend how to keep track of assets and liabilities. Then, in an email describing the spreadsheet, the AWC alleges that Neely falsely explained that he used his name instead of his friend’s company name, and names of individuals, instead of various vendors of his friend’s company. Why such substitutions? According to the AWC, Neely claimed he took these steps to ensure that he “would not be liable for any plans that [his friend] put together on his own or any mistakes he made while inputting his information.” Apparently for good measure, Neely added that his friend provided the individual names – which likely raised quite a few eyebrows given that one of the provided names was a client of Neely’s at Respondent AXA’s. The AWC states that “[d]espite these statements, the Firm accepted Neely’s explanation without adequate further review.
It was reported that FINRA concluded Respondent AXA’s response to the red flags raised by Neely’s spreadsheet, his explanations, and his background constituted a failure to reasonably supervise him and a further failure to investigate adequately the various indications concerning his misconduct, in violation of NASD Rules 2010 and 2110. Accordingly, FINRA imposed upon Respondent AXA the sanctions of a Censure and $100,000 fine.
Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you or a family member have sustained investment losses due to your stock broker or financial advisor’s recommendations, call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website at: www.securitieslawyer.com.
Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.
AWC · AXA · AXA Advisors LLC · AXA annuity contracts · AXA Financial Inc · AXA Group · AXA mutual funds · AXA varialbe life insurance · broker theft from customers · brokers recommending risky investments · failure to supervise brokers · Financial Industry Regulatory Authority · FINRA · FINRA arbitration · FINRA Broker Check · finra lawyer · finra securities arbitration lawyer · Firm failure to supervise broker · firms should review compliance and supervisory procedures · Firms slow on reporting findings · Ft. Lauderdale Securities Lawyer · high risk investments · investment fraud · Kenneth Neely AXA · Kenneth Neely broker complaints · Lars K. Soreide · Lars K. Soreide Soreide Law Group · Neely Barred by FINRA · Neely Ponzi Scheme · Neely USB ponzi scheme · Ponzi scheme · recover losses from ponzi schemes · REIT fraud · risky investments · securities lawyer · Soreide Law Group PLLC · St Louis Investment Club Ponzi Scheme · St. Charles REIT Ponzi Scheme · stock broker fraud · Stock fraud lawyer · targeting elderly investors · Unsuitable investments to elderly