A Registered Principal with American Portfolios Financial Services, Inc. allegedly failed to supervise the activities of a "rogue" broker who engaged in unsuitable short-term trading in bonds and mutual funds in an elderly customer’s account.  To settle those FINRA charges, the Principal was offered, and agreed to, relatively light sanctions - which Compliance Insights views as hardly commensurate with the serious nature of his failings as a supervisor. Russell Clark, Registered Principal. In 1979, Clark first became registered with FINRA as an Investment Company and Variable Contracts Products Representative and Direct Participation Program Representative.  In 1983, he became registered as a Direct Participation Program Principal.  In 1987, he became registered as a General Securities Representative and Principal.  In 1988, Clark became registered as a Municipal Securities Representative, and, in 1988, he became registered as a Municipal Securities Principal. Since 9/7/01 - 4 days before the 9/11 terrorist strike - Clark was associated with American Portfolios Financial Services, Inc., serving as a General Securities Representative, General Securities Principal and Municipal Securities Principal. He does not have any FINRA disciplinary history. The Broker, Prior to Being Supervised by Clark. From January 2003 through January 2007, while registered through another member firm, a broker engaged in unsuitable short-term trading in bonds and mutual funds in the accounts of customers.  The member firm ultimately terminated the broker for inappropriate  trading. The broker then moved to American Portfolios Financial Services, and from 1/30/07 to 5/19/08 - the "relevant period" - he was registered as a representative.  Upon joining American Portfolios, the broker was placed on heightened supervision based on his prior conduct. FINRA Findings and Allegations Against Russell Clark, as Principal. Even though the broker was placed on heightened supervision, he nevertheless continued to engage in unsuitable short-term trading in bonds and mutual funds in the account of an elderly customer - just as he did at the previous firm. Throughout the relevant period, the broker was assigned to Russell Clark for supervision.  Clark also was given the task of enforcing the firm's heightened supervision plan.  However, Clark failed to supervise the broker for compliance with that plan, and otherwise failed to take appropriate action to prevent this broker from continuing to commit rule violations.

• e.g., while the heightened supervision plan required Clark to review and compare each investment transaction with the customer's new account form for suitability, Clark did not review all of the broker's transactions for such unsuitable short-term trading activity.

• e.g., while the supervision plan and the Firm's procedures required the broker to use certain mutual fund disclosure forms in connection with his transactions, Clark failed to ensure that the broker used such forms.

• Clark, by failing to adequately supervise the broker - i.e., he did not carry out his delegated supervisory responsibilities - Clark violated NASD Conduct Rules 3010 and 2110.

[C-I Note: Unfortunately, FINRA provide no further details.  However, it would appear that Clark might have been grossly negligent in not adequately supervising the broker.  Was he intimidated by the broker?  Did he share in the illicit commissions generated by the "rogue" broker?  We can't tell.]

FINRA Sanctions. Despite what appears to be grossly negligent failures as a supervisor of a broker with a history of unsuitable trading, Russell Clark was only fined $5,000 and suspended for 10 days from serving as a principal - i.e., rather than a full suspension from serving in any and all capacities - with any broker-dealer. One day, perhaps someone will explain the rationale for the sanctions in this case. For further details, go to:  [FINRA Case #2008015183101]. [Disciplinary Actions for December 2011]