FINRA started out by disciplining Veritrust Financial of Austin, TX, for charging excessive commissions on mutual fund transactions.  What followed was an exhaustive list of violations and deficiencies throughout the firm.  So, why didn't FINRA require a re-write of the entire WSP.  Hmmm?!?! FINRA Alleged Findings. Veritrust allegedly failed to detect or prevent excessive commissions on mutual fund liquidations.  FINRA found that the firm failed to put in place any supervisory systems or procedures to ensure that customers were not inadvertently charged commissions, in addition to the various fees disclosed in the mutual fund prospectus, on their mutual fund liquidation transactions.   All told, the firm's failures generated approximately $64,110 in commissions for the firm. Other Violations and Deficiencies. 1.  Firm failed to adequately supervise email - at least one RR sent and received securities-related email correspondence through an outside email account, but the firm had no system or procedures to capture and review such email. 2.  Firm failed to conduct an annual inspection of all of its Offices of Supervisory Jurisdiction (OSJ) branch offices. 3.  Firm committed various advertising violations in connection with certain public communications, including websites, one billboard and one newsletter.

• Websites were not approved prior to use by a firm principal, they did not contain a hyperlink to the FINRA or SIPC websites
• One website, the billboard and the newsletter failed to maintain a copy of the communication beginning on the first date of use; and sections of websites that concerned registered investment companies (mutual funds) were either not filed, or timely filed, with FINRA’s Advertising Regulation Department.
• Websites contained information that was not fair and balanced, did not provide a sound basis for evaluating the facts represented, or omitted material facts re: equity indexed annuities, fixed annuities and variable annuities.
• Websites contained false, exaggerated, unwarranted or misleading statements concerning mutual B shares;  firm websites and the billboard did not prominently disclose the firm’s name, and a website, in connection with a discussion of mutual funds, failed to disclose standardized performance data, failed to disclose the maximum sales charge or maximum deferred sales charge and failed to identify the total annual fund operating expense ratio, and a website, in a comparison between ETFs and mutual funds failed to disclose all material differences between the 2 products.

4.  Firm had numerous problems with customer complaints.  It reported certain customer complaints late, if at all.  Firm failed  was late in updating an RR's Form U5 for required disclosures.  Finally, firm failed to create and maintain a record of a customer complaint and related records that included all required information. 5.  Firm failed to make sure all covered persons, including its president and CEO, completed the CEP Firm Element. 6.  Firm's 3012 and 3013 reports were inadequate.

• 3012 report for one  year failed to provide a rationale for the areas that would be tested, failed to detail the manner and method for testing and verifying that the firm’s system of supervisory pols and procedures were designed to achieve full compliance, did not provide a summary of the test results and gaps found, failed to detect repeat violations including failure to conduct annual OSJ branch office inspections, advertising violations, customer complaint reporting, and ensuring that all covered persons participated in the Firm Element of CE.

• 3013 report for that year did not document the processes for establishing, maintaining, reviewing, testing and modifying compliance policies to achieve compliance with all applicable rules and regs, as well as the manner and frequency with which the processes are administered.  Firm also failed to enforce its 3013 procedures re: notification from customers regarding address changes.

Sanctions. Firm was ordered to pay $90K fine and $34K plus interest in restitution to customers. For further details, go to:   [FINRA AWC #2008011640802]   [Disciplinary Actions for Sept. 2011]