The Financial Industry Regulatory Authority fined broker-dealer Cadaret Grant $200,000, alleging the Atria Wealth Solutions subsidiary “failed to reasonably supervise” a former broker’s multiple undisclosed securities transactions.
Without admitting or denying the findings, Cadaret Grant Chief Financial Officer and Managing Director Donald Taylor signed a letter of acceptance, waiver and consent on June 4 in which he agreed to the fine and censure. FINRA accepted the letter Wednesday.
Cadaret Grant and Samuel E. Cohen, an attorney for Philadelphia law firm Marshall Dennehey Warner Coleman & Goggin, who represented Cadaret Grant, did not immediately respond to requests for comment on Thursday.
From April 2014 to March 2017, the firm failed to reasonably supervise a registered representative, identified in the letter only as “SP,” who “conducted multiple undisclosed private securities transactions,” FINRA alleged.
The private securities transactions were “part of a Ponzi scheme that SP orchestrated, which resulted in millions of dollars in losses to its victims, including several customers of Cadaret Grant,” according to the regulator. The firm “failed to take reasonable steps to investigate red flags that SP was involved in private securities transactions,” according to FINRA.
As a result of its actions, Cadaret Grant violated retired NASD Rule 3010 (for conduct before December 1, 2014), FINRA Rule 3110 (for conduct on or after December 1, 2014) and FINRA Rule 2010, FINRA said.
In April 2012, FINRA issued an AWC in which Cadaret Grant consented to findings that, among other things, it “failed to supervise the use of personal email accounts being used for firm business and failed to reasonably supervise the activities of a registered representative even after becoming aware of red flags of sales practice violations,” the regulator said. The firm’s “failure to reasonably supervise allowed the representative to continue to make unsuitable recommendations to firm customers,” the regulator claimed, noting Cadaret Grant consented to sanctions including a censure and a $200,000 fine then also.
2 Reps Suspended Over Discretionary Trades
Separately, FINRA suspended Cadaret Grant reps Robert James McNamara and Eugene J. Long from association with any FINRA member firm in any and all capacities for 15 business days and fined them $5,000 each. The regulator claimed that, between August 2017 and August 2018, they each exercised discretion without written authorization in multiple customer accounts — 18 in the case of McNamara and 64 in the case of Long, who is also registered as a general securities principal.
Without admitting or denying the findings, McNamara signed a letter of acceptance, waiver and consent on June 15 in which he agreed to the sanctions. FINRA accepted the letter Wednesday. Without admitting or denying the findings, Long signed a letter of acceptance, waiver and consent on June 25 in which he agreed to the sanctions. FINRA accepted that letter Thursday.
FINRA conducted an examination of Cadaret Grant between August 2017 and August 2018, the regulator noted in each letter. “During that period, McNamara effected at least 90 discretionary trades in 18 customer accounts,” the regulator said in his AWC letter. During that same period, Long “effected at least 80 discretionary trades in 64 customer accounts,” according to that AWC letter.
Although the customers knew that the reps were exercising discretion in their accounts, the reps did not have prior written authorization to do so from any of the customers, according to FINRA. Additionally, Cadaret Grant had not approved any of the accounts for discretionary trading, it noted. As a result of their actions, each of them violated FINRA Rule 2010 and retired NASD Rule 2510(b), FINRA alleged.