Among recent actions by the Financial Regulatory Authority were the censure and fine of Capital Guardian LLC for failure to investigate and follow up red flags on the liquidation of Venezuelan bonds into U.S. dollars.
In addition, FINRA censured and fined J.P. Morgan Clearing and Sterne Agee, the former for failures relating to short positions and the latter for supervisory failures relating to confidential customer and proprietary information.
Sterne Agee Put Client Data on Laptop, Then Lost It
FINRA censured Sterne Agee and fined the firm $225,000 on findings that the firm failed to establish and maintain a supervisory system reasonably designed to protect confidential customer and proprietary information.
Customer information was placed on an unencrypted laptop, which was subsequently lost. As a result, FINRA found that the firm placed customers’ personal and confidential information at risk.
In addition, the findings stated that supervisory procedures were insufficient to ensure that the firm’s most sensitive customer and proprietary information stored on laptops was being adequately safeguarded by appropriate technology.
The firm neither admitted nor denied the findings, but consented to the sanctions. It must also conduct an internal review of its policies, procedures, systems and training with regard to compliance with Regulation S-P of the Securities Exchange Act of 1934.
Capital Guardian Fined for Missing Suspicious Venezuelan Bond Transactions
FINRA censured Capital Guardian and fined it $125,000 after it found that the firm failed to detect, investigate and report potentially suspicious transactions. Among those transactions were some related to money movements into and out of customer accounts that experienced minimal securities activity.
Other transactions that raised red flags were those involving the deposit and quick liquidation of Venezuelan bonds issued under the Transaction System for Foreign Currency Denominated Securities (SITME) program, which allowed for Venezuelan entities, and to a lesser extent individuals, to convert Venezuelan Bolivars (VEF) to U.S. dollars (or other currency foreign to Venezuela). Entities or individuals would purchase approved dollar-denominated Venezuelan bonds locally in VEF and then sell the bonds abroad for dollars under the program.