FINRA Sets Fines

“The activities in question occurred between 2004 and 2006,” Kuo says. “The holding company of LPL Financial acquired IFMG in November 2007. As a matter of policy, we do not comment on activities that did not involve our organization at the time they occurred.”

Wells Fargo, PNC Investments and WM Financial Services: FINRA says the firms failed to give adequate guidance to broker-dealer principals who approved VA transactions, or in the case of WM Financial, UIT transactions.

Wells Fargo Investments, PNC Investments and WM Financial also failed to spot transaction patterns that could show a broker may have failed to tailor recommendations properly to each customer’s investment needs and situations, FINRA says.

“We are glad to have resolved this matter with FINRA and move forward from here,” a Wells Fargo spokesman says. “We remain committed as an organization to do what is best for our clients.”

A J.P. Morgan Chase spokeswoman declined comment. As of the time this article was posted, PNC Bank had not yet responded to a request for comment on the allegations.

In related news, FINRA imposed a $1 million fine on NEXT Financial Group Inc., Houston, in connection with allegations of problems with supervision of 130 office of supervisory jurisdiction branch managers.

OSJ branch managers’ transactions and sales activities are then supposed to be supervised by another registered principal designated by the firm, FINRA says.

Between January 2005 and November 2006, the firm let OSJ branch managers to supervise their own handling of customer accounts without adequate review, FINRA says.

In November 2006, the firm adopted a regional manager supervisory system to provide principal review of the OSJ managers’ transactions, but, until December 2007, it required the regional managers to review too many transactions with too little access to client suitability information, FINRA says.

The problems with supervisions led to a failure to detect churning by an OSJ manager and a broker, FINRA says.

FINRA also found weaknesses in the systems and procedures governing NEXT’s variable annuity exchanges.

VA sales accounted for about 33% of the firm’s revenue during the period that FINRA analyzed.

“The firm’s written supervisory procedures…failed to provide adequate guidance concerning the criteria that should be considered in recommending variable annuity exchanges to its customers including, for example, a comparison between the features, costs and benefits of the old and new products, FINRA says.

FINRA has imposed a $35,000 on NEXT’s former chief compliance officer and suspended her as a principal for 2 months. FINRA also is requiring the former chief compliance officer to re-take her qualifying examination to be a supervisor and to take 15 hours of training on supervision issues.

NEXT and the former chief compliance officer have neither admitted nor denied the charges, but they consented to the entry of FINRA’s findings.

NEXT was not immediately available to comment on the FINRA allegations.