Broker-Dealer Settles FINRA Charges for Reg BI and Form CRS Violations

A broker-dealer settled FINRA charges for supervisory failures over Regulation Best Interest ("Reg BI") and Form CRS obligations.

According to the Letter of Acceptance, Waiver, and Consent ("AWC"), the firm's supervisory system consisted only of a general memorandum, which did not provide Reg BI implementation measures. When the firm revised its written supervisory procedures, the procedures incorrectly suggested the regulation applied only to new accounts. FINRA found the firm failed to describe procedures for complying with Reg BI's Care Obligation, such as steps for making best-interest recommendations or supervisor reviews and failed to address the Conflict-of-Interest Obligation. As a result, FINRA found the firm failed to establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance with Reg BI.

In addition, FINRA found the firm's procedures lacked instructions for preparing, filing, delivering, or updating Form CRS, and failed to designate a supervisor responsible for compliance. As a result, FINRA found that the firm failed to establish and maintain written supervisory procedures reasonably designed to achieve compliance with Form CRS obligations.

Accordingly, FINRA found the firm violated Exchange Act Rule 15l-1(a)(1) ("Reg BI"), MSRB Rule G-27 ("Supervision,") and FINRA Rule 3110 ("Supervision").

To settle these charges, the firm agreed to a censure and a $35,000 fine.