September 7, 2023

Firm Fined for Lax Oversight of Outside Business Activities

A broker-dealer settled charges with FINRA for failing to properly oversee the outside business activities of two of its representatives.

In a Letter of Acceptance, Waiver and Consent ("AWC"), FINRA found that the firm and the CEO/CCO/Principal (during the relevant period) were aware that the representatives were engaged in securities-related activities away from the firm, but were not adequately evaluating the scope of these activities. As a result, FINRA said that the broker-dealer did not properly oversee the representatives in compliance with FINRA Rule 3270.01 ("Outside Business Activities of Registered Persons"). FINRA also found that the firm violated 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 fine of $75,000 and (iii) comply with an undertaking to resolve the issues identified in the AWC; the former CEO/CCO/Principal agreed to (i) a six-month suspension, (ii) pay $75,000 fine (joint and several with the broker dealer) and (iii) complete 50 hours of continuing education. The former CEO/CCO/Principal also acknowledged that he was subject to a statutory disqualification during the suspension.

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