Firm Fined for Failing to Register Investment Banking Employees
Commentary by Glen Barrentine
A firm settled FINRA charges for allowing unregistered individuals to perform investment banking activities.
According to the AWC, 10 individuals in the firm's "US Investment and Corporate Banking Group" engaged in investment banking activities, such as advising clients on securities offerings, without being properly registered with FINRA. FINRA found that the firm's supervisory system was insufficiently designed to monitor registration compliance. FINRA also found that the firm failed to include unregistered individuals in supervisory reports and did not prevent these employees from participating in deals, despite knowing they were not registered.
FINRA determined that the firm violated FINRA Rules 1210 ("Registration Requirements"), 3110(a) ("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 $190,000 fine and (iii) implement enhanced supervisory controls to prevent unregistered employees from engaging in investment banking activities.
Commentary
The AWC highlights the importance of having appropriate procedures in place to ensure that newly hired employees do not act in a capacity for which registration is required until after they are registered with FINRA through approval of a Uniform Application for Securities Industry Registration or Transfer (Form U4). Consistent with the AWC, these procedures may include reminders to unregistered individuals, and their supervisors, of their unregistered status, as well as an escalation process if the registration is not resolved in a timely manner. In addition, unregistered individuals should be blocked from accessing firm systems or being added to deal teams or other roles requiring registration.