Firm Fined for Reg BI and Private Placement Recordkeeping Violations

A broker-dealer settled FINRA charges for Regulation Best Interest ("Reg BI") violations, untimely filing of private placement documents and annual certification failures.   

According to the AWC, for the relevant period, the firm lacked any written policies or procedures addressing Reg BI. FINRA said that during the 30-month period following Reg BI's effective date, the firm's written supervisory procedures made no mention of Reg BI, and there was no evidence that supervisory personnel were provided any criteria for assessing whether recommendations were made in the retail customer's best interest. Further, FINRA found that supervisors were not instructed on how to identify or mitigate conflicts of interest, and there was no system in place to monitor such activity.

In addition, FINRA found that the firm failed to make timely filings for "16 private placement offerings." FINRA said that required offering documents were submitted from 30 days to over a year past the deadline—and one filing was not submitted at all.

FINRA also found that the firm failed to complete its annual compliance certifications. FINRA said the firm's CEO did not certify that "compliance and supervisory processes" were in place, nor did the firm produce the required report outlining those processes. 

FINRA determined that the firm willfully violated Exchange Act Rule 15l-1 ("Regulation Best Interest") and FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade"), 3110 ("Supervision"), 3130 ("Annual Certification of Compliance and Supervisory Processes") and 5123 ("Private Placements of Securities").

To settle the charges, the firm agreed to (i) a censure and (ii) a $40,000 fine.