A global investment banking and brokerage firm agreed to settle FINRA charges of selling IPO shares to "restricted persons."
According to the Letter of Acceptance, Waiver, and Consent, the firm violated FINRA Rule 5130 by making over 1,400 prohibited sales of IPO shares in 325 offerings to 149 customer accounts where restricted persons had a "beneficial interest." FINRA stated that the firm allowed the "associated persons of broker-dealers and/or immediate family members of . . . financial advisors" ("FAs"), restricted persons normally prohibited from buying IPO shares, to receive shares due to failures in the firm's eligibility tracking system. FINRA alleged that at least 120 different FAs carried out the prohibited IPO sales.
FINRA claimed that these transactions took place because the firm failed to design adequate supervisory systems to achieve compliance with FINRA Rule 5130, failed to provide sufficient training to its employees regarding compliance, and failed to enforce existing written procedures. Additionally, FINRA stated that the firm failed to respond sufficiently upon discovering red flags.
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