FINRA Fines Broker-Dealer $2 Million for Deficiencies in Its Structured Product Business and Unsuitable Reverse Convertible Sales

FINRA AWC Letter No. 20080117193-01

April 12, 2011

FINRA announced that it fined a broker-dealer for deficiencies in its structured products business, including (1) unsuitable sales of reverse convertible securities; (2) inadequate supervision of sales practices; and (3) inadequate supervision of accounts funded loans from its affiliated bank. FINRA alleges that the BD, despite increased sales in structured products, failed to implement processes for reviewing or approving any particular structured product prior to offering to customers. In addition, FINRA alleges that the firm did not have sufficient processes for monitoring customer accounts for unsuitable purchases and had no policies on account concentration. FINRA also found that the firm failed to make certain filings to obtain a "no objections opinion" required by the FINRA corporate financing rule and that it also failed to comply with certain provisions on offering securities of its affiliates.

Please contact any of the following Cadwalader attorneys if you have any questions about this item:

Steven Lofchie; [email protected] Jeffrey Robins; [email protected] Maurine Bartlett; [email protected]

Glen Barrentine, [email protected]

Cross References

FINRA News Release

NASD Rules 2110, 2310, 2710, 2720, 3010

FINRA Rules 2010, 2111, 5110, 5190, 5121

Lofchie's Guide to Broker-Dealer Regulation, Ch. 5, § 1.A.2 (reasonable basis, customer product suitability)