A Chicago-based broker-dealer and its Registered Principal - who also served as its ROP, Series 24, and FinOp Principal - agreed to settle FINRA charges that the firm, acting through its Principal, failed to adequately direct and/or supervise an unregistered outside consultant who had been hired to handle registration and Form 3070 filings. Findings of Alleged Violations. Between 2007 and 2009, Birkelbach Investment Securities, Inc., acting through its owner and CEO, Carl Max Birkelbach, failed to adequately supervise to ensure the timely reporting of customer settlements.  From 4/17/07 through 3/30/09, BIS did not designate anyone as the firm's CCO.  On 3/30, Birkelbach designated himself the firm's CCO, while also continuing his responsibilities as CEO. During the relevant period, they relied on an unregistered outside consultant to process NASD Rule 3070 filings and amendments to registration forms - Forms BD and Forms U4 - gave the consultant inadequate instructions and guidance, and did not otherwise ensure that timely and complete filings and amendments were made. Mr. Birkelbach allegedly neglected to instruct the consultant to process disclosures or otherwise take action to correct the deficiencies until a later date, even after FINRA advised him of the deficiencies.  Birkelbach and the firm further failed to ensure that settlements of customer complaints were reported on a timely basis on 3070 filings and the disclosed on amended Forms BD and Forms U4.

e.g. - On 5/4/06, a customer filed an arbitration claim against BIS, Birkelbach and a BIS registered rep.  Nearly one year later, on 4/2/07, all three executed a settlement agreement with the customer in the amount of $150,000.  Because the settlement exceeded $15,000 (for an individual) and $25,000 (for a firm), it met the reporting requirement of Rule 3070(a) and (b), and was required to be reported no later than 10 business days from the date of settlement - i.e., on or before 4/17.  Two years later, on 4/17/09, BIS filed a 3070 filing for Murphy disclosing the customer settlement (721 days late).  On 12/8/09, 3070 disclosure filings for BIS and Birkelbach were made (966 days late).

FINRA Fines and Sanctions. BIS and Birkelbach were fined $10,000, jointly and severally.  Birkelbach received an additional $15K fine and 30-day full suspension and a 90-day principal suspension.  He was required to requalify by examination as a principal. For further details, go to:   AWC #2009016354101. [FINRA Disciplinary Actions for October 2011]