Broker-Dealer Settles FINRA Charges for Supervisory Failures on "Outside Business Activities"

A broker-dealer that sells mutual funds and variable products settled charges with FINRA for failing to supervise the outside business activities ("OBAs") of its registered representatives.

In a Letter of Acceptance, Waiver, and Consent ("AWC"), FINRA stated that the broker-dealer "approved at least 37 OBAs without evaluating and documenting its evaluation." FINRA found the broker with failing "to establish, maintain, and enforce a supervisory system" over its registered representatives' OBAs for possible conflicts of interest and to ensure that "approval for the activities was given prior to engagement in the activity." As a result, FINRA determined that the firm violated FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade"), Rule 3110 ("Supervision") and Rule 3270 ("Outside Business Activities of Registered Persons").

The firm agreed to (i) a censure and (ii) pay a $30,000 fine.