Firm Settles Reg BI and Form CRS Violations

A firm settled FINRA charges for failing to establish and enforce written policies reasonably designed to achieve compliance with Regulation Best Interest ("Reg BI") and Form CRS.

According to the AWC, the firm failed (i) "to timely file required documents with FINRA for three private placement offerings that the firm sold to retail investors;" (ii) to establish and maintain written policies to comply adequately with Reg BI (finding that updates to the policy were not tailored to the firm's business and that one version of the firm's policies discussed customer account monitoring services, even though the firm did not maintain customer accounts); and (iii) to address conflicts of interest concerning securities issued by affiliates. FINRA determined that the firm failed to implement an effective supervisory system for Reg BI compliance, as the WSPs were vague and lacked detailed supervisory steps, including, for example, failing to identify a principal responsible for WSPs.

FINRA also found that the firm failed to establish a supervisory system for Form CRS compliance stating that the written policies were not tailored to the firm's business and lacked specific procedures for Form CRS obligations.

As a result, FINRA found that the firm violated Exchange Act Rule 151-1(a)(1) ("Regulation Best Interest"), and FINRA Rules 3110 ("Supervision") and 2010 ("Standards of Commercial Honor and Principles of Trade").

To settle the charges, the firm agreed to (i) a censure, (ii) pay a $60,000 fine and (iii) undertake a process on written policies designed to achieve compliance with Reg BI.