AWC/2008012444203/ 2010
Martin was supervisor of his member firm’s sales and trading operations and direct supervisor of a registered representative who effected pre-arranged and fictitious trades in collateralized mortgage obligations through the firm’s proprietary trading account.
The transactions appeared to terminate the firm’s ownership of the securities and to generate profits for the firm and the trader, but they were sham transactions because the firm remained the beneficial owner of the securities and the purported transaction profits concealed actual and substantial losses.
The registered representative was able to accomplish and maintain his scheme because Martin reviewed his activity on a daily basis rather than in a manner that would evidence trading patterns over time and expose the firm’s losses and risk. Martin was responsible for the firm’s overall compliance with applicable laws, rules and regulations and for implementing the firm’s supervisory policies, practices and procedures, and Martin failed to supervise the registered representative in a manner reasonably designed to achieve compliance with applicable laws, rules and regulations.
Martin failed to cause the firm to preserve electronic communications.
AWC/2008012444202/ 2010
Mello served as her member firm’s FINOP and was responsible for monitoring the firm’s financial condition to determine whether its net capital was sufficient to conduct a securities business. The firm’s registered representatives effected trades in collateralized mortgage obligations (CMOs) through the firm’s proprietary trading account. The transactions appeared to remove beneficial ownership of the CMOs from the firm, but they were sham transactions because the securities remained in the firm’s inventory.
The registered representative was able to accomplish and maintain his scheme because Mello and others at the firm reviewed his activity on a daily basis rather than in a manner that would evidence trading patterns over time and expose the firm’s losses and risk. As a result of the registered representative’s activity and the firm’s method of monitoring it, the firm conducted a securities business on multiple days while failing to maintain its required minimum net capital and, because Mello failed to discern the true effect of the registered representative’s trading on the firm’s net capital, she allowed the firm to conduct a securities business on multiple occasions while in violation of SEC Exchange Act Rule 15c3-1.
AWC/2007008882402/ 2010
The Firm permitted a then-proprietary trader and associated person to engage in proprietary firm options trading when he was not properly licensed to do so and, as a result, the firm failed to register a person engaged in its investment banking or securities business in the category of registration appropriate to the function to be performed as specified in NASD Rule 1032. The Firm's written supervisory procedures required all proprietary traders to possess the Series 7 general securities representative license and Series 55 equity traders limited representative license (and Series 63 qualification), and provided for no exceptions unless approvals were obtained and the trader’s activities were restricted until the licensing deficiency was rectified; the associated person possessed none of the licenses required by the firm nor were activities restricted. As a result, the firm failed to enforce its written supervisory procedures by allowing the associated person to disregard FINRA licensing requirements and the firm’s internal licensing requirements applicable to its proprietary traders.
The Firm failed to enforce written internal firm trading limits that applied to the associated person by failing to enforce its written supervisory procedures concerning the imposition of individual trading limits on proprietary traders; the firm failed to take adequate steps to ensure the associated person and other relevant associated persons of the firm understood the meaning and application of the terms of the associated person’s individual trading limits, and allowed the associated person to exceed his individual trading limits on several occasions.
AWC/2007008882403/ 2010
- 529 College Savings Plan
- Abandoned Accounts
- Algorithmic Trading
- Altered Customer Phone Records
- AML
- Annual Compliance Certification
- Annual Compliance Meeting
- Annuity
- Asset Purchase Agreement
- ATM
- Away Accounts
- Background
- Bank
- Banks
- Beneficiary
- Best Efforts Offering
- Blackjack
- Borrowed
- Borrowing
- Breakpoint
- Casino
- CE
- CFTC
- Changes Of Address
- Check
- Check Kiting
- Checks
- CIP
- CMO
- Commodity Futures
- Commodity Pool
- Communications
- Computers
- Confidential Customer Information
- Contingency Offering
- Continuing Education
- Conversion
- Conviction
- Cooperation Agreement
- Correspondence
- Credit Cards
- Currency
- Day Trading
- Deceased
- Delivery Instructions
- Discretion
- Do Not Call
- EIA
- Elderly
- Electronic Communications
- Electronic Storage
- Embezzled
- Escheat
- Escrow
- Estate
- Expenses
- False Proof Of Insurance
- False Statements
- Fax
- Federal Appeal
- Felony
- Finder Fees
- Finder\\\'s Fees
- Fingerprints
- FINOP
- Firm Committment Offering
- FOCUS
- FOREX
- Forgery
- Freely-Tradable
- Futures
- Gifts
- Guaranteeing Against Losses
- Hedge Fund
- Impersonation
- Inspections
- Instant Messaging
- Insurance
- Internet
- Investment Advisor
- Letter Of Credit
- Life Insurance
- Living Trust
- LOA
- Loan
- Log On IDs
- Margin
- Mark-Up Mark-Down
- Material Change Of Business
- Membership Agreement
- Minimum Contingency
- Modification Of Sanctions
- Money Laundering
- MSRB
- Mutual Fund
- Mutual Funds
- NAC
- Net Capital
- Notary
- Notice Of Levy
- NSF
- Operations Manager
- Options
- Orders
- OSJ
- Outside Accounts
- Passwords
- Payphones
- POA
- Policy Lapse
- Ponzi
- Power Of Attorney
- Pre-arranged Trading.
- Private Placement
- Private Securities Transaction
- Producing Manager
- Production Quota
- Promissory Notes
- Proprietary Traders
- Public Appearances
- Qualified Domestic Relations Order
- Radio
- Regulation S-P
- REIT
- Research
- Restitution
- SAR
- Scripts
- Signature
- Solicited
- Statutory Disqualification
- Suitability
- Supervision
- Supervisory System
- Surrender Charge
- Surrender Charges
- Suspense Account
- Taping Rule
- Telemarketing
- Television
- Term Life
- Testing
- Third Party Vendor
- Time & Price Discretion
- Trading Limits
- Trading Volume
- Trust Account
- Turnover
- Two Party Consent
- U.S. Treasuries
- UIT
- Unclaimed Funds
- Universal Lease Programs
- Unregistered Office
- Unregistered Person
- Unregistered Principal
- Unregistered RRs
- Unregistered Securities
- Unregistered Supervisor
- Variable Annuity
- Variable Insurance
- Website
- Willfully
- WSP
- Zero Coupon