FINRA Sanctions Firm for Supervisory Failures

FINRA fined and ordered a firm to pay nearly $530,000 in restitution for failing to detect or prevent the theft of more than $1 million from nine of its customers, eight of whom were senior citizens.

FINRA found that from August 2006 until May 2013, an employee of the company posed as a broker and ran a conversion scheme by targeting former customers from another brokerage firm that had previously fired her. She then urged the victims to establish accounts at the firm and also established joint accounts with them in which she was listed as an owner. She eventually established more than 50 accounts and converted assets from a number of these accounts for her own personal benefit.

FINRA also found that the firm failed to detect or adequately follow up on multiple "red flags" related to the employee's scheme. Additionally, FINRA found that the firm's inadequate supervisory systems and procedures contributed to the failure to detect and prevent the employee's fraudulent activities.