The Financial Industry Regulatory has fined GMS Group, a full-service broker-dealer that primarily conducts a municipal securities business, $35,000 for failures related to Regulation Best Interest and Form CRS, the customer relationship summary.
According to FINRA's order, from June 30, 2020, until October 2023, GMS Group, headquartered in East Hanover, New Jersey, failed to establish, maintain and enforce written policies and procedures to comply with Reg BI, Municipal Securities Rulemaking Board Rule G-27 and FINRA Rules 3110 and 2010.
During the same period, GMS Group, which has 65 registered reps and eight branch offices, also failed to establish and maintain written supervisory procedures to comply with Form CRS, in violation of the rules.
GMS Group was censured and fined $35,000 ($17,500 for violating MSRB Rule G-27).
"GMS Group's initial approach to Reg BI implementation consisted solely of a June 29, 2020 memorandum that described the regulation in general terms without providing implementation measures," FINRA's order states.
"The firm's WSPs contained no reference to Reg BI until it revised them in September 2020. Even then, the WSP's treatment of Reg BI was limited to a single provision that incorrectly suggested the regulation applied only to new accounts," the order continues.
Until October 2023, the firm's policies and procedures failed to describe procedures for achieving compliance with the Reg BI's care obligation.
"The procedures did not describe the steps representatives should take to make recommendations in customers' best interests, nor did they describe any methods for supervisors to review recommendations for Care Obligation compliance, such as procedures for evaluating whether representatives had considered costs and reasonably available alternatives," the order states.
"Similarly, the firm's policies and procedures did not address the Conflict of Interest Obligation, providing no framework for identifying, disclosing, or mitigating, where appropriate, conflicts of interest associated with recommendations to retail customers," according to the order.
Further, GMS "failed to provide a framework for preventing, detecting, and promptly correcting Reg BI violations or for otherwise achieving compliance with Reg BI," FINRA said.
During the same time period, GMS Group's WSPs "did not include any procedures for preparing, filing or updating the Form CRS; delivering the Form CRS to prospective and new retail customers; creating and maintaining records related to the Form CRS; or designating a supervisor with responsibility to achieve compliance with the firm's Form CRS obligations," FINRA said.
The firm consented to FINRA's findings without admitting or denying them.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.