A broker-dealer settled charges for violating FINRA recordkeeping regulations by failing to keep an accurate memorandum for each brokerage order.
In a Letter of Acceptance, Waiver and Consent, FINRA found that the firm did not maintain its physical brokerage order tickets, but rather relied on records generated by its clearing firms. One of the clearing firms did not indicate on the records whether a trade was solicited or unsolicited, reporting "N/A" in the solicitation field. As a result, the firm's books and records were inaccurate with respect to whether certain trades in customers' accounts were solicited or unsolicited. As a result, FINRA charged the firm with violating Exchange Act Section 17(a) and Rule 17a-3 ("Records to Be Made by Certain Exchange Members, Brokers and Dealers") thereunder, and FINRA Rules 4511 ("General Requirements") and 2010 ("Standards of Commercial Honor and Principles of Trade").
Further, when the firm's supervisory personnel became aware that representatives were "regularly" reporting "N/A" in the solicitation field, the personnel treated the trades as unsolicited during supervisory reviews, and made changes to the order memoranda on an ad hoc basis. As a result, FINRA charged the firm with violations of FINRA Rules 3110 ("Supervision") and 2010.
To settle charges, the firm agreed to (i) a censure and (ii) pay a $55,000 fine.
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