In December and, again, in February, FINRA reported what looks to be the aftermath of a FINRA Sweep Investigation into Stock-to-Cash ("STC") programs.  January probably had its fair share of such cases. What led C-I to conclude that a Sweep had taken place is that the firms, RRs and Principals disciplined for selling STC programs to customers were geographically diverse. 

In December, FINRA disciplined an L.A.-based broker with a $25K fine and a 5-month suspension.  Besides allegedly failing to conduct due diligence on the STC program lender - its operations, financial stability, the broker is alleged to have:

• failed to sufficiently determine whether his clients’ ownership interest in the pledged securities was adequately protected.
• didn't understand the risks inherent in the strategy and therefore lacked a reasonable basis for his recommendations.
• engaged in private securities transactions through his marketing of the program, but didn't notify the firm or get its prior approval.
• was directed by his supervisor to disclose his participation in the program to the firm, yet didn't do so until the day of his supervisor’s annual branch exam; 
• continued to recommend the program to customers even while the firm was reviewing his participation. 
• was told by the firm’s sales practice unit that he wasn't allowed to recommend Stock to Cash transactions.   This was FINRA Case #2007008935001.

In February, FINRA disciplined one firm and at least 6 RRs or Principals.  Fines to individuals ranged from $10K to $25K, and suspensions ranged from 15 to 75 days.  Fact patterns were similar, if not identical across all cases.  The firm, InterSecurities, was fined $50K and ordered to certify its relevant policies, systems and procedures, and to submit WSP's, etc. 

C-I discusses several February cases in separate postings that immediately follow.  For complete details and to read all disciplinary cases, go to:   [FINRA Disciplinary Actions for February].