A firm and its CEO settled FINRA charges for failing to adequately supervise the firm's outside business activities (or "OBA") and employee communications.
In a Letter of Acceptance, Waiver and Consent, FINRA said that the firm's CEO failed to conduct a reasonable investigation, as outlined under the firm's written supervisory procedures (or "WSPs"), relating to a registered representative's sale of promissory notes in private securities transactions. FINRA found that the CEO inappropriately relied on a single conversation with the registered representative, as opposed to a formal investigation of the transactions. Additionally, FINRA determined that the CEO failed to reasonably review electronic communications that were flagged for review.
As a result of the CEO's supervisory failures, FINRA determined that the firm and the CEO violated FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade"), 3110 ("Supervision") and 3270 ("Outside Business Activities of Registered Persons").
To settle the charges, the firm agreed to (i) a censure, (ii) a $30,000 fine and (iii) an undertaking to conduct a review of its written supervisory procedures and a risk-based review of its electronic communications. The firm's CEO agreed to (i) a two-month suspension from associating in any principal capacity with a FINRA member and (ii) a $10,000 fine.
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