More On Legal & Compliancefrom The Advisor's Professional Library
- The Need for Thorough and Effective Policies and Procedures Whethere an advisor is SEC or state-registered, RIAs must revise their policies and procedures to address significant compliance problems occurring during the year, changes in business arrangements, and regulatory developments.
- Registration Requirements for Investment Advisor Representatives (IARs) When individuals launch an advisory firm, they must avoid marketing themselves or the firm as investment advisors before they are properly approved and registered. Otherwise, they are subject to severe penalties.
FINRA board member Joel Blumenschein has resigned as he was recently fined $30,000 and suspended by FINRA for allegedly failing to supervise one of his company’s brokers, Gary Gossett.
The complaint against Blumenschein, president of Freedom Investors, claimed that Gossett made “a series of unsuitable penny stock trades in the retirement account of a customer of limited means” without the customer’s permission.
FINRA described Freedom Investors' oversight system as “so inadequate that Blumenschein was unable to provide a consistent or coherent description of it.” FINRA also claimed in the settlement that “his testimony, under oath, was at times both evasive and contradictory, thus highlighting the system's inadequacies.”
Tracy Stoneman of Stoneman Law Firm in Westcliffe, Colo., said in a statement that she has long felt that FINRA and its predecessor, the National Association of Securities Dealers, have been “soft" on their members. She penned a book in 2002 titled “Brokerage Fraud: What Wall Street Doesn't Want you to Know,” in which she criticized the regulators for being incapable of properly supervising their own members because of the “conflict in not wanting to bite the hand that feeds it.”
Stoneman, who’s about to write another book that she says will “have even harsher criticism of the regulators,” said that the recent FINRA board member sanction is a perfect example of a serious problem in the upper ranks of FINRA “when board members participate in the same wrongful activity that FINRA is charged with supervising.”