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November 21, 2019 at 04:25 PM
(Photo: Ronald Pechtimaldjian/ALM)
The Financial Industry Regulatory Authority censured NYLife Securities over its failure to enforce its written procedures for supervising what FINRA said were “higher-risk” mutual fund sales from September 2014 to December 2016 that were “subject to significant volatility.”
NYLife Securities submitted a letter of acceptance, waiver and consent to FINRA Nov. 7 in which it agreed to be censured, fined $250,000 and pay restitution to customers for their losses. The firm agreed to the letter without admitting or denying the findings. FINRA accepted the letter Wednesday.
According to the firm’s written procedures, when such fund sales resulted in customer portfolios that were overconcentrated in higher-risk securities, its registered brokers were required to work with customers to reallocate the portfolios or figure out a way to change their risk tolerances and investment objectives to correspond with their assumption of additional risk, FINRA noted.
However, the firm instead “adjusted customers’ risk tolerances and investment objectives to accommodate sales of higher-risk mutual funds, without first seeking the customers’ input,” according to the letter.
Those adjustments led to losses totaling $1.4 million, the letter said. By virtue of its failure to enforce its written supervisory procedures, the firm violated NASD Rule 3010(b) and FINRA Rule 3110(b), and consequently FINRA Rule 2010, according to the letter.
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The firm’s failure to enforce its written procedures “facilitated a registered representative’s soliciting unsuitable investments to approximately four dozen customers in a trio of nondiversified mutual funds that focused on the exploration, production, storage, transportation, processing, and use of energy and natural resources,” according to the letter.
