Among recent enforcement actions by the Financial Industry Regulatory Authority were the censure and fine of two firms for failing to appropriately discount sales charges of unit investment trusts.
Also, Oppenheimer & Co. was censured and fined for inaccurate short position reporting, while RBC Capital Markets faced disciplinary actions over conditioning an arbitration settlement on the customers’ not fighting the firm’s efforts to seek expungement.
RBC Capital Markets Censured, Fined on Dispute Resolution Conditions
FINRA censured RBC Capital Markets and fined the firm $125,000, after finding that it conditioned settlement in a FINRA dispute resolution arbitration on the former customers’ agreeing not to oppose the firm’s efforts to seek expungement of all reference to the dispute from the CRD system.
FINRA prohibited such conditions on settlements in Rule 2081, which went into effect in July 2014. According to the agency, RBC’s supervisory system was not adequate to comply with the prohibition.
It also failed to ensure and document that the requirements of the rule were communicated to all relevant personnel until it published its new procedures seven months after the rule became effective, as well as failing to have a designated supervisor responsible for enforcing the requirements. Its WSPs simply restated the text of Rule 2081, along with explanatory information from FINRA, and did not include a designated supervisor who would be responsible for compliance.
The firm neither admitted nor denied the findings but consented to the sanctions.
FINRA Censures, Fines Centaurus Financial on UIT Sales Charges
Centaurus Financial Inc. was censured by FINRA, fined $100,000 and required to pay $85,281.62 in restitution to customers after the agency found that the firm failed to identify and apply sales charge discounts to certain customers’ eligible purchases of unit investment trusts, resulting in customers paying excessive sales charges of approximately $85,281.62.
According to the agency, the firm relied primarily on its registered representatives to apply appropriate UIT sales charge discounts to customer purchases, but did not ensure that the sales charge discounts were identified and calculated accurately. Its supervisory system and written supervisory procedures, said FINRA, weren’t designed to ensure that customers received appropriate discounts on eligible UIT purchases.
The firm has neither admitted nor denied the findings, but consented to the sanctions and paid restitution to all affected customers. Newbridge Securities Censured, Charged on UIT Sales Charges
Newbridge Securities Corporation also found itself in FINRA’s crosshairs for failing to identify and apply sales charge discounts to certain customers’ eligible purchases of UITs, resulting in customers paying excessive sales charges of approximately $172,835.29.
FINRA censured the firm, fined it $115,000 and required it to pay $188,803.99 in restitution to customers. The firm has adopted a new UIT trade process that representatives must adhere to, which is now reflected in the firm’s WSPs. Prior to that, the firm had no WSPs in place specific to UIT discounts.
The firm neither admitted nor denied FINRA’s findings, but consented to the sanctions. It has also paid full restitution, plus statutorily calculated interest.
Oppenheimer & Co. Censured, Fined on Short Position Reporting Failures
FINRA censured Oppenheimer & Co. and fined the firm $275,000 on findings that Oppenheimer inaccurately reported short positions and failed to report short interest positions on multiple settlement dates.
According to the agency, the firm erroneously reported “fail to receive” positions on settlement dates in the firm’s “Buy-In Account” as short interest positions, when such positions should not have been reported to FINRA. It also did not have a supervisory system that could achieve compliance with short position reporting requirements.
In addition to the censure and fine, the firm was required to implement procedures reasonably designed to achieve compliance. Oppenheimer neither admitted nor denied the findings but consented to the sanctions.
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