Broker-Dealer Fined for Failing to Prevent Unauthorized Transfers

A broker-dealer settled FINRA charges for failing to prevent one of its representatives from making multiple unauthorized transfers of funds from customer accounts to third-party accounts.

FINRA Rule 3110 requires a broker-dealer to establish, maintain and enforce a supervisory system reasonably designed to review the transfer of funds from customer accounts to third-party accounts and outside entities. According to FINRA, the broker-dealer violated FINRA Rule 3110 (and its predecessor, NASD Rule 3010), as well as other securities regulations due to one of its representatives (i) converting $473,496 from five customers' variable annuities and (ii) executing unauthorized transfers on four occasions.

To settle the charges, the broker-dealer agreed (i) to a censure, (ii) to a $350,000 fine and (iii) to provide a certification from a senior officer and principal of the firm that supervisory systems and written supervisory procedures have been improved with respect to monitoring the transfer of customer funds to third parties and outside entities.