FINRA published its Disciplinary Actions for January 2012 and, for a change, Compliance-Insights will conduct an experiment.  In addition to providing selected comprehensive case studies, we'll select some disciplinary case involving firms, individuals, and both firms and individuals.  For these latter cases, we'll mark-up FINRA's text - highlighting relevant issues and facts, while sharing sidebar comments. Please let us know which approach you prefer.  We appreciate any feedback you can provide.  Thanks.

Firms Fined, Individuals Sanctioned

Case 1.  Meyers Associates, L.P. (New York, NY) and Bruce Meyers (Reg'd Principal, NY) agreed to settle FINRA charges;  firm and Meyers were censured and fined $35,000, jointly and severally. Meyers was suspended ... in any principal or supervisory capacity for 4 months. It is alleged that ... the firm failed to completely respond, and to timely respond, to FINRA requests for information and documents. The findings stated that Meyers was ultimately responsible for supervision at the firm; the requests were all addressed to Meyers, who delegated the task of responding to them, but he failed to ensure that the responses were complete and timely.  (FINRA Case #2009016332401)

[C-I Comments: Was this fine and sanction really necessary?  Were they avoidable?  Without reference to further details, and presuming that neither the firm or principal intended to hide something from FINRA, we conclude that the violations were due principally to carelessness.  In our book, that shouldn't be acceptable, particularly if individuals were delegated the task of responding.  If that simple scenario was the case, it might be appropriate for the firm to impose an in-house penalty against the responsible party, including a financial penalty.  The downside, however, would be that a significant financial penalty might have to be reported to FINRA, which might open a can of worms.]

Case 2.  Scottsdale Capital Advisors Corp (Scottsdale, AZ) and Justine Hurry (Reg'd Principal, AZ) agreed to settle FINRA charges;  firm accepted a $125K fine - which includes $18K in disgorged commissions earned in connection with violative sales of unregistered securities.  Hurry accepted a $7.5K fine and a 40-day suspension in any principal capacity, other than as FinOp. As it pertained to AML deficiencies, ... it's alleged that the firm, acting through Hurry, failed to implement its AML procedures, as it did not adequately monitor for and/or investigate facts and circumstances present in certain customer accounts that constituted “red flags” in its written AML compliance program.  Neither Hurry, nor anyone else at her firm, took steps to monitor for disciplinary background or multiple account red flags or for transactions triggering the journal transfer, penny stock or wire transfer red flags. Further, the firm, acting through Hurry, failed to file SAR-SF forms to report suspicious activity. The findings also included that the firm failed to document red-flag investigations in accordance with its written AML compliance program and procedures because the firm’s CCO failed to create, or cause Hurry to create, a record of questionable background reviews. FINRA found that the firm’s AML procedures pertaining to the disciplinary background red flag were not sufficiently specific to provide any meaningful guidance as to where and how the firm would look for customers with questionable backgrounds. When the firm and Hurry did file SARs, they were found to contain inaccurate or incomplete information, or they filed SARs that failed to provide adequate information for determining that the reported activity was suspicious.  The firm and Hurry failed to establish and implement policies and procedures reasonably expected to detect and cause the reporting of transactions required under 31 U.S.C. 5318(g) and the implementing regulations thereunder. As it pertained to deficiencies with its supervisory policies and procedures, ... it's alleged that:

• firm, acting through Hurry, failed to designate and specifically identify to FINRA at least one principal to establish, maintain and enforce a system of supervisory  control policies and procedures.
• firm, acting through Hurry, also failed to establish, maintain and enforce WSPs concerning: (i) producing managers, (ii) designation of a principal to review their customer account activity,  (iii) the limited size and resources exception, (iv) testing, updating and annual certification of firm WSPs, and (v) addressing the designated principal’s annual report to senior management.
• firm, acting through Hurry, did not submit an annual report to firm management detailing the firm’s system of supervisory controls, the summary of test results and significant exceptions, and any additional or amended supervisory procedures in response to the test results.
• Hurry failed to establish a supervisory system and WSPs reasonably designed to achieve compliance with applicable securities laws and regulations, and failed to enforce its WSPs.
• Hurry failed to prepare a report pertaining to its home-office inspection.
• firm did not complete its 3013 report as required under IM-3013 for 2 years.
• firm’s WSPs and records of branch- and home-office inspections were inadequate.
• firm did not enforce its WSP’s pertaining to LOA's.  (FINRA Case #2008011593301)

Case 3.  TriCor Financial, LLC (Las Vegas, NV) and Frank Aguilar (Reg'd Principal, Las Vegas, NV) agreed to settle FINRA charges;  firm accepted a $15K fine, jointly and severally with Aguilar.  Aguilar also accepted a 2-month suspension in any principal capacity.  It's alleged that the firm, acting through Aguilar - its president and CCO - failed to file with FINRA an application for approval of the change of ownership at least 30 days prior to a change in ownership in which a 3rd-party entity became a 25% indirect equity owner of the firm.  (FINRA Case #2010025513101) For further details, and to review other disciplinary cases, go to:   [FINRA Disciplinary Actions for January 2012]