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NEWSLETTERS & ALERTS
B/D and CEO Fight FINRA's Broad Indictment of Its Supervisory Procedures
by Howard Haykin
Windsor Street Capital (fka Meyers Associates) and Bruce Meyers are appealing decisions by the NAC (National Adjudicatory Council) to fine the firm ($700,000) and Mr. Meyers ($100,000), and to bar Mr. Meyers from serving with any FINRA member in a supervisory or principal capacity.
FINRA FINDINGS. The NAC decisions, which followed the respondents’ hearing before a panel of the FINRA Office of Hearing Officers, are based on various FINRA charges that:
- the firm and Meyers, its principal and CEO, sent, or caused to be sent, misleading and unbalanced advertising materials via email to prospective investors. FINRA found that:
► Meyers failed to adequately disclose numerous material facts about a company.
► In many emails, Meyers made exaggerated and unwarranted claims about the company’s prospects and about the company’s shares trading in Q1 of 2011.
► Meyers failed to provide a factual basis for his claims in the emails.
► In some emails, Meyers failed to prominently disclose the firm’s name and, in all of them, he failed to disclose the firm’s relationship with the company.
- the firm inaccurately recorded personal expenses of Meyers and another firm principal as business expenses in the firm’s general ledger, causing the firm to underreport the compensation paid to Meyers and the principal on FOCUS reports and annual audit reports for 2011 and 2012.
- the firm's supervisory procedures were lacking in that:
► the supervisory systems did not include procedures to account for accurately in the firm’s books and records the personal expenses that the firm reimbursed Meyers and the principal under the terms of their employment agreements.
► Meyers took no steps to ensure that the firm had procedures in place to account for the reimbursement of personal expenses that he and the principal received from the firm.
► the firm’s WSPs failed to address how supervisors were to review e-correspondence, and the firm failed to document any such reviews – e.g., how supervisors selected e-correspondence for review; how they were to review it; how often they needed to review it; and, how they were to document their reviews.
► the firm failed to report to FINRA statistical and summary information re: written customer complaints it received from March 2007 to July 2010, and it failed to timely report to FINRA summary and statistical information re: 3 customer complaints received in 2009.
► the firm’s WSPs did not adequately address required areas of supervision of producing managers and transmittals of customer funds and securities. In addition, the firm’s 2009, 2010 and 2011 annual reports regarding its supervisory control system did not adequately summarize the procedures used to test and verify the efficacy of its system. The sanctions, with the exception of Meyers’ supervisory/principal bar, are not in effect pending their appeal.
FINANCIALISH TAKE AWAYS. While we take a break from the case as the SEC appeal process plays out, two other Financialish.com case studies come to mind:
- In Excessive Trading: Did Meyers Associates Fiddle While Broker Burned Customer’s Account?, posted in March 2018, I expressed concerns about the presumed failure of Meyers Associates to supervise a registered rep who allegedly exercised unauthorized discretion and traded excessively in a customer’s account.
- In Cold-Callers: What Not to Do When 'Dialing For Dollars', posted in January 2011, a registered rep at Meyers Associates unwittingly cold called a registration specialist with the Missouri Securities Division. During the call, the registered rep described Nuance Communications as “the Bentley” of stocks, “money in the bank,” and a “safe money” investment.
So, considering the facts and circumstances of these three cases, one might draw the conclusion that an apparent years-long pattern of supervisory deficiencies existed at Meyers Associates. Of course, such a conclusion is based on conjecture and others might reach other conclusions. YOUR THOUGHTS?
This case was reported in FINRA Disciplinary Actions for April 2018.
For details on this case, go to ... FINRA Disciplinary Actions Online, and refer to Case #2010020954501.