Broker-Dealer Fined for Self-Supervision by Firm Principals

A broker-dealer settled FINRA charges for failing to implement policies prohibiting firm principals from supervising their own trading activity.

FINRA found that the firm's written supervisory procedures failed to identify supervisors with responsibility for trade reviews, and did not assign one principal's trading activity to a different principal for review, thereby enabling firm principals to approve their own trading activity for customer accounts. FINRA also found that the broker-dealer's policies contained outdated references to manual reviews of trade blotters despite the firm having transitioned to an automated review system.

FINRA determined that the supervisory failure constituted a violation of FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade") and Rule 3110(a)-(b) ("Supervision"). To settle the charges, the broker-dealer agreed to (i) a censure, (ii) a civil monetary penalty of $10,000 and (iii) undertakings to revise its supervisory controls to achieve compliance with Rule 3110.