A broker-dealer settled FINRA charges for failing to test its supervisory controls, policies and procedures, and for failing to document the test results in required certifications and reports.
FINRA alleged that as a result of these compliance failures, the firm violated FINRA Rule 3120 ("Supervisory Control System") and FINRA Rule 3130 ("Annual Certification of Compliance and Supervisory Processes"). FINRA Rule 3120(a) requires that member firms designate a principal to (i) establish, maintain and enforce a system of supervisory control policies and procedures that test and verify whether a member firm's supervisory procedures are reasonably designed to achieve compliance with applicable securities laws and regulations and FINRA Rules, and (ii) submit to the member firm's senior management an annual report detailing the system of supervisory controls, the testing results and significant identified exceptions, and any additional supervisory procedures created in response to the supervisory tests. FINRA Rule 3130 in part requires member firms to have their CEO or an equivalent senior officer annually certify that processes to establish, maintain, review, test and modify written compliance policies and supervisory procedures are reasonably designed to achieve compliance with federal securities laws and FINRA rules.
To settle the charges, the firm - which did not have any relevant disciplinary history with the SEC, FINRA or any state regulators - agreed to a censure and a $5,000 fine.
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