FINRA Fines Firm for Failing to Supervise Outside Business Activities

A brokerage firm settled FINRA charges for failing to review and evaluate outside business activities ("OBAs") of a registered representative.

According to the AWC, the representative notified the firm that he planned to organize, manage and supervise limited partnerships through a self-owned external management company. The representative disclosed that he would receive both a management fee and carried interest as compensation.

FINRA found that the firm failed to: (i) assess whether the activity would interfere with the representative's responsibilities to the firm or its customers; (ii) determine whether the activity should be treated as an outside securities activity under FINRA Rule 3280 ("Private Securities Transactions of an Associated Person"); and (iii) impose any conditions or restrictions on the activity.

FINRA noted that none of the limited partnership's investors were firm customers, and no investors suffered losses.

FINRA found that the firm violated FINRA Rules 3110 ("Supervision"), 2010 ("Standards of Commercial Honor and Principles of Trade"), 3270 and 3270.01 ("Outside Business Activities of Registered Persons").

To resolve the charges, the firm agreed to (i) a censure and (ii) pay a $35,000 fine.