AWC/2008011794901/ 2010
The Firm
- issued research reports that the firm labeled “Asset Analysis Focus” (AAF) on a paid subscription basis;
- did not consider the AAF a research report;
- did not have in place policies and procedures designed to ensure compliance with the various research related rules applicable to firms that issue research reports, such as those relating to research analyst and research principal registration, disclosures, conflicts, annual attestations and written supervisory procedures;
- allowed registered representatives at the firm to collaborate in the preparation of AAFs without having passed a qualifying examination,
- allowed an individual also to collaborate in the preparation of AAFs without being registered as a general securities representative or in any other capacity through the firm, and without having passed a qualifying examination.
A general securities principal supervised the preparation of AAFs without having passed the qualifying examination.
Certain AAFs the firm issued failed to disclose certain NASD Rule 2711 required information, including the financial interest in the issuer of the research analysts who prepared the reports, price charts for issuers where the firm has assigned a price target for at least one year, and the valuation methods used to determine price targets and the risks that may impede achievement of the price targets.
An individual who collaborated in the preparation of AAFs purchased securities of companies during the 30-day period before the publication of the research reports concerning those companies. In addition, The firm did not have the required research report-related written supervisory procedures in place, and the firm did not have a senior officer make the required annual attestation that the firm had adopted and implemented the required written supervisory procedures.
Moreover, the Firm did not make the required annual attestations for several years and filed inaccurate annual attestations for other years.
AWC/2009016184701/ 2010
The Firm
- did not have a qualified individual to supervise the conduct of the firm’s head of research, who was a senior research analyst—but instead permitted senior principals to supervise the analyst when they were not qualified to do so;
- reviewed and approved its research reports prior to use, but did not evidence such approval; as a result, the firm issued research reports that were not approved by a registered principal’s signature or initial;
- failed to adopt or implement written supervisory procedures reasonably designed to achieve compliance with applicable rules regarding the supervision of research activity and the approval of research reports;
- failed to attest annually (for two years) that it had adopted and implemented such procedures, and that the firm failed to make or obtain research analyst attestations in connection with their public appearances as Securities and Exchange Commission (SEC) Regulation AC required.
OS/2007011496203/ 2010
- shared a draft of a section of a research report that contained a research summary, rating and price target with a subject company before it was published, and the draft was not provided to legal or compliance personnel at the firm;
- did not monitor or place restrictions on the trading of stock picks by research analysts, who placed trades in violation of the limits placed on analysts by NASD Rule 2711(g) and failed to retain records showing the dates that newsletters were published prior to 2005;
- failed to disclose the valuation methods it used to determine the price target and the risks to achieving the price target in the stock pick sections of its research report;
- failed to have a principal review, initial and date its published research reports before the earlier of its use or filing with FINRA’s Advertising Regulation Department;
- failed to adopt and implement written supervisory procedures to
cover research reports distributed to the public and ignored red flags
regarding stock pick sections qualifying as research reports; and
- failed to establish, maintain and enforce written supervisory procedures for its newsletter, in that the firm had no written supervisory procedures that governed research reports distributed to the public.
The Firm and Register filed false attestations regarding compliance with NASD Rule 2711, and the Firm failed to make the certifications required by SEC Regulation AC for its stock pick sections that the views expressed accurately reflected the research analysts’ personal views. Furthermore, Register failed to adequately discharge his supervisory responsibilities and never took effective action to ensure that his firm was meeting its obligation to comply with FINRA rules, in that he never monitored the trading or ownership of stock picks by the firm’s research analysts, imposed no restrictions on whether the analysts could trade or own securities when they were profiled as stock picks, and allowed research analysts to publish research reports unsupervised.
Register Financial Associates, Inc.: Fined $50,000
George Robert Register (Principal): Fined $15,000; Suspended 30 days in Principal/Supervisory capacities only
- 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
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- Best Efforts Offering
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- Breakpoint
- Casino
- CE
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- Check Kiting
- Checks
- CIP
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- Commodity Futures
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- Computers
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- 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
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- Fingerprints
- FINOP
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- FOCUS
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- Futures
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- Guaranteeing Against Losses
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- Money Laundering
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- Notary
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- Operations Manager
- Options
- Orders
- OSJ
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- Passwords
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- POA
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- Ponzi
- Power Of Attorney
- Pre-arranged Trading.
- Private Placement
- Private Securities Transaction
- Producing Manager
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- Promissory Notes
- Proprietary Traders
- Public Appearances
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- Radio
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- REIT
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- Statutory Disqualification
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- Surrender Charge
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- Suspense Account
- Taping Rule
- Telemarketing
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- Term Life
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- Time & Price Discretion
- Trading Limits
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- Turnover
- Two Party Consent
- U.S. Treasuries
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- Unregistered Office
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- Unregistered RRs
- Unregistered Securities
- Unregistered Supervisor
- Variable Annuity
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- Website
- Willfully
- WSP
- Zero Coupon