[ by Howard Haykin ]

FINRA took a New Orleans-based broker-dealer to task for deficiencies and apparent violations, that ran the gamut from supervision of employee trading to maintenance of securities watch lists. A bewildering assortment of lax procedures.

Profile of Respondent.   Global Hunter Securities, LLC, is a New Orleans-based broker dealer and a FINRA member since 3/13/03.  It currently employs approximately 100 registered individuals and has 8 branch offices. 

FINRA Findings and Allegations.   FINRA claims that the firm committed numerous violations based on the following supervisory failures:

• Supervise written communications of associated persons conducted in a foreign language.  Certain research and investment banking businesses involved Mandarin Chinese, though the Firm lacked supervisory personnel with fluency in that language.   [From 1/1/10 - 2/13/11].
• Global Hunter failed to establish and maintain an adequate system for the monitoring of employee trading activity in accounts held at other FINRA member firms.   [All 2010].
• Failed to enforce its own supervisory procedures of requiring newly-hired personnel to disclose their outside brokerage accounts.  Firm, thus could not adequately monitor employee trading activity in such accounts.  [All 2010]
• Lacked an information barriers program reasonably designed to detect and prevent the misuse of material, nonpublic information by employees.  Firm failed to maintain a restricted list in the manner required by the Firm's own procedures or by Joint Memo 91-45.   [All 2010].

a.  Rather than add an issuer's security to the restricted list upon establishment of an investment-banking relationship, the securities were added to list in a haphazard manner and, in some cases, several days after the investment banking relationship had been established.

b.  Documentation on the restricted list was inadequate - (i) didn't reflect when the particular security was added to or removed from the list;  (ii) didn't identify the contact person;  (iii)  wasn't adequately used to monitor employee trading in such listed securities in accounts held at other FINRA firms.

• Issued Equity Securities Research reports that lacked proper disclosures.  [From 1/1/09  - 2/14/11].

a.   17  reports  stated on the front  page: '"See analyst  certification  and other important disclosures  at the end of this report." As stated in Notice to Members 04-18, a notation on the first page that refers readers to the "end of the report" is not sufficient.
b.   2 reports  did  not  disclose  that  the  Firm  had  received  compensation  for investment  banking services from the subject company  in the past 1 2 months as required by NASD Conduct Rule 2711 (h)(2)(A)(ii)(b).
c.   7  research  reports  failed  to  disclose  that  the  Firm  had  managed  or  co­ managed  a public offering of securities  for the subject company in past 12 months as required by NASD Conduct Rule 27ll(h)(2)(A)(ii)(a).
d.   12 research reports contained the statement: ""Global Hunter Securities, LLC docs and seeks to do business with the companies covered in this research report." Such   disclosure   lacks the specificity required by NASD Conduct Rule 27ll(h)(l0).
e.   17 reports   contained  the statement: "the  firm, its  affiliates, or its employees may buy or sell  securities of  the company covered."  As stated  in Notice to Members 04-18, firms may not use conditional or indefinite language in research report disclosures.
f.   3 reports did not contain adequate disclosures and info pertaining to price targets as required by NASD Rule 2711 (h)( 7).

• Firm permitted its CEO to serve on the research analyst compensation committee, despite his substantial involvement in the Firm's investment banking business.  [1/1/09 - 2/14/11].
• Firm disseminated  to prospective customers a promotional slide presentation regarding particular services offered by Firm - which was not fair and balanced, and lacked required risk disclosures.  The presentation also did not provide sound basis for evaluating certain representations made in the presentation regarding the services discussed.   [At times during 2010, 2011].
• Firm failed to obtain FINRA approval prior to effecting a material change in its business operations.  During the stated time period. Global Hunter increased  its sales personnel by 22 persons in excess of the limitations of the safe harbor provisions.   [From 1/1/09 - 6/30/11].FINR

Sanctions.    Global Hunter Securities agreed to pay $150K to settle the FINRA charges.

For further details, go to:   [ FINRA AWC NO. 2011025644101].   This case was reported in April Disciplinary Actions.