Firm Fined for Supervisory Failures over Consolidated Reports

A broker-dealer settled FINRA charges for failing to supervise consolidated statements of customer accounts from the broker-dealer and its affiliates, leading to the dissemination of materially inaccurate account information.

According to the AWC, the firm did not have adequate supervisory systems to oversee manual entries made by its representatives into a third-party consolidated reporting system. FINRA found that the firm relied on its representatives to self-comply with requirements to upload documentation or provide explanations for manual entries, without implementing systems to flag noncompliance. Additionally, FINRA said the supervisors were not required to verify the accuracy of manual entries before reports were shared with customers.

FINRA concluded that the supervisory deficiencies allowed a terminated representative to manually input fictitious brokerage account information for three related customers. FINRA found the representative bypassed the required steps for verification, leading to false account information being provided to customers through the firm's online reporting platform.  

FINRA 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 and (ii) pay a $700,000 fine.