Broker-Dealer Fined for Supervisory Failures over Customer Funds Transmittals

A broker-dealer settled charges with FINRA for failing to monitor and supervise transmittals of customer funds to third parties.

In a Letter of Acceptance, Waiver and Consent ("AWC"), FINRA stated that the broker-dealer sent four wire transfers of more than $6.6 million from a joint brokerage account held by two customers to two third parties. FINRA said the transfers were made despite red flags that "the wires were for large and increasing amounts in a short period of time and the wires were being sent to third-party recipients (both of whom were located in foreign countries) who lacked any connection to the customers."

FINRA said that the hacker made the request through the email account of a representative at one of the broker-dealer's correspondent firms and that that the broker-dealer received and approved the wire transfer requests without taking steps to confirm that the requests were genuine. FINRA concluded that the broker-dealer violated FINRA Rules 3110 ("Supervision") and 2010 ("Standards of Commercial Honor and Principles of Trade").

To settle the charges, the broker-dealer agreed to (i) a censure, (ii) pay a $350,000 fine and (iii) comply with certain specific undertakings.