AWC/2008015700901/ 2010
The Firm failed to establish an effective supervisory system and written supervisory procedures reasonably designed to ensure that discounts were correctly applied on eligible UIT purchases. The Firm’s written supervisory procedures had limited information regarding UIT sales charge discounts, and omitted the fact that certain UIT sponsors permitted exchange discounts for purchases made with the proceeds from a UIT holding of another sponsor; this was particularly relevant because the firm’s UIT business was almost exclusively with UIT sponsors that provided this sales charge discount.
The Firm's procedures lacked substantive guidelines, instructions, policies or steps for brokers, trading personnel or supervisors to follow to determine if a customer’s UIT purchase qualified for, and received, a sales charge discount. The broker and firm compensation diminished when the customer received a sales charge discount and, because of this, the firm needed to be particularly diligent in providing guidance to brokers, supervisors and trading personnel on UIT sales charge discounts.
The Firm failed to provide eligible customers with appropriate discounts on both UIT rollover and breakpoint purchases. The firm failed to identify and appropriately apply sales charge discounts in certain top-selling UITs and, as a result, the firm overcharged customers in the sample approximately $20,000.
In addition, the Firm sold UITs that imposed a deferred sales charge that was generally charged upon redemption if a customer sold a UIT before the deferred sales charges were imposed. Moreover, the Firm failed to ensure that its customers’ UIT purchase confirmations included the required language stating that “on selling your shares, you may pay a sales charge. For the charge and other fees, see the prospectus.” The Firm misstated on certain UIT confirmations that a sales charge discount had been applied when, in fact, it had not.
AWC/2007010684401/ 2010
Acting through Carroll, its president and registered principal, the Firm failed to adequately implement a supervisory system designed to achieve compliance with applicable securities laws and regulations; specifically, the firm and Carroll failed to implement an adequate system to supervise a branch office’s activities in light of deficiencies identified during branch audits, and failed to appoint a properly qualified principal to supervise the branch office’s activities.
The Firm allowed Carroll and Childs to accept, and they did accept, a gift and/or gratuity in excess of $100 from the president and general partner of an entity that offered an alternative investment product, and Childs sold almost $6 million of that product to customers at the firm’s branch office.
The Firm failed to properly maintain its email communications and, acting through Carroll, failed to have a procedure in place to ensure that his own email, which was designated as legal and confidential, was properly maintained and reviewed. The Firm failed to establish and maintain an adequate supervisory system in the areas of internal communications and correspondence.
The Firm charged both commissions and advisory fees on transactions in alternative investment products whose offering documents specifically prohibited such activity.
Childs
- charged customers commissions, in the amount of $434,589.03, and an annual percentage-based advisory fee on transactions in alternative investments; and
- made unsuitable recommendations to customers and had no reasonable basis for believing that his recommendations of nonliquid alternative investments were suitable for the customers in light of their age, financial needs, annual income, liquid net worth and risk tolerance.
Cambridge Legacy Securities, L.L.C.: Censured, Fined $50,000; Ordered to pay $21,864.74, plus interest, in restitution to customers; If the firm fails to provide proof of restitution within 15 days, it shall be immediately suspended from FINRA membership until proof has been provided
Oran Ben Carroll (Principal): Fined $25,000; Suspended 3 months in Principal only capacity
Russell Kent Childs (Principal): Fined $25,000; Ordered to pay $412,724.28, plus interest, in restitution to customers;Suspended 9 months in all capacities; If Childs fails to provide proof of restitution within 15 days, he shall be immediately suspended from association with any member in any capacity until proof has been provided
AWC/2007011308803/ 2010
AWC/2007007345601/ 2010
Small failed to establish and maintain adequate supervisory procedures concerning the review of
- email correspondence,
- incoming and outgoing hard copy correspondence at the firm’s branch offices that he was in charge of, and
- outside investment activity of registered representatives at the firm.
- NASD Rule 3012(a)(2)(B) and its requirement that members establish, maintain and enforce procedures reasonably designed to review and monitor transmittals of funds or securities between customers and registered representatives, and
- NASD Rule 3012(a)(2)(C) and its requirement of an analysis and determination of whether producing branch office managers should have been subjected to heightened supervision.
2006006518904/ 2010
Reilly failed to develop and implement an AML compliance program, as required by the Bank Secrecy Act, reasonably designed to detect suspicious money movements and trading activities in corporate customers’ account, investigate the activity and make the appropriate Suspicious Activity Report (SAR) filing. The firm’s AML program lacked procedures on monitoring and preventing money laundering and did not explain what follow-up would be required if a money laundering “red flag”was detected or when a SAR must be filed. Reilly failed to detect and investigate the suspicious nature of transactions in a representative’s corporate customer’s account.
AWC/2007007344801/ 2010
- develop and implement an adequate supervisory system and written procedures for detecting and reporting suspicious activity;
- provide adequate anti-money laundering (AML) training for its designated AML officers and firm employees; and
- conduct adequate independent testing of its AML compliance program for two years.
AWC/2007009463801/ 2010
The Firm failed to have an adequate supervisory system, including written supervisory procedures and a supervisory control system, to properly and timely identify customer checks deposited at affiliated bank branches and ensure that all customer check deposits were duly credited to the appropriate customer accounts. The Firm escheated approximately $133,616.65 in funds to the Commonwealth of Kentucky when it was unable to identify the proper customer accounts. As a result of the unidentified customer check deposits, the firm failed to make and keep accurate daily records of all receipts and disbursements of cash and other debits and credits in its books and records, including entries to an Escheatment Account. The Firm understated its net capital charges and incorrectly calculated its Customer Reserve Formula. In addition, the Firm produced inaccurate month-end customer account statements, incorrectly liquidated certain customer fully paid securities, and failed to segregate some customers’ fully paid securities, resulting in intra-day possession or control deficits. The Firm did not prepare required inter-company account reconciliations, failed to properly record certain aged unfavorable reconciliation differences and failed to conduct supervisory reviews of certain reconciliations and accounts.
The Firm ’s supervisory procedures did not adequately ensure that its research analysts obtained the required approval for public appearances and provided proper disclosures during such public appearances. In addition, the Firm issued certain research reports that
- contained indefinite “may” language regarding future investment banking services that the firm expected to provide,
- did not include analyst certifications on the front page,
- contained front pages that did not specify the page or pages in the research report on which the analyst certifications were to be found, and
- incorrectly included the analyst certification information as part of the important disclosures.
AWC/2008011565202/ 2010
AWC/2007007315501/ 2010
The Firm failed to retain email communications related to its business that were sent to and from non-firm email accounts that firm registered representatives working from one of its branch offices used, and failed to establish and maintain a system for supervisory review of those outside emails.
Acting through a registered principal, the Firm failed to develop a privacy policy or disseminate privacy notices required by SEC Regulation S-P to its customers. censured, fined $5,000, jointly and severally, and fined an additional $60,000
The Firm failed to maintain new account documents for some accounts and failed to maintain complete new account documents for other accounts that lacked customer information. The Firm failed to enforce its written supervisory procedures concerning the dissemination of a privacy policy and the collection and maintenance of complete new account forms.
AWC/2007011343301/ 2010
The Firm failed to
- report quarterly statistical and summary information to FINRA regarding a substantial number of customer complaints;
- establish,maintain and enforce a supervisory system reasonably designed to identify, capture, analyze and report customer complaints that are required to be reported pursuant to NASD Rule 3070(c);
- put adequate systems and procedures in place to ensure that all customer complaints were identified and forwarded to the appropriate firm personnel,
- adequately train all personnel who might potentially receive customer complaints regarding proper handling of complaints, and
- ensure that sufficient guidance was given to personnel who were responsible for reviewing complaints to determine which complaints were reportable.
- 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