[ by Howard Haykin and Melanie Gretchen ] And Just What Exactly was CM Securities Thinking When It Delegated All That Responsibility to This Individual? A Registered Principal in Henderson, NV, agreed to settle FINRA charges that she failed to reasonably supervise the firm’s registered reps in connection with the sale of shares of a REIT (real estate investment trust) to retail customers, among other alleged violations. Respondent's Professional Background. Erin Ackerman joined the securities industry in February 2003 with CM Securities, LLC.  After receiving her Series 7 license on 6/20/03 and her Series 24 license on 9/10/03, she assumed the roles of the Chief Compliance Officer, ("CCO") and Chief Operating Officer ("COO"), as well as the responsibility as direct supervisor of the firm's retail RRs.  She dropped her CCO role in 2006, and continued to serve as the COO and direct supervisor of the RRs.  Four years later, on 5/28/10, she voluntarily terminated her employment from CM. FINRA Findings and Allegations. From July 2004 through February 2008, Ackerman allegedly failed to reasonably supervise CM's registered reps in connection with the sale of shares of a real estate investment trust ("REIT") to retail customers.  Based on the recommendations she made as COO, firm customers purchased a total of $1,679,304 in the REIT shares.  However, investors lost their entire principal investment upon the devaluation of the shares and the company's involuntary bankruptcy filing. Ms. Ackerman allegedly failed as CCO to establish, maintain, and enforce an adequate supervisory system to monitor customer accounts for potentially unsuitable levels of concentration in a security or investment sector.  In addition, she failed to ascertain that purchases were suitable for a customer based on the customer's investment objectives and risk tolerance.    These supervisory deficiencies caused Ackerman to violate NASD Rules 3010(a) and (b), and 2110.

• NASD Rule 3010(a) requires that each member establish and maintain a system to supervise the activities of each registered representative, registered principal, and other associated person that is reasonably designed to achieve compliance with the federal securities laws and NASD and FINRA Rules.

• NASD Rule 3010(b) requires that each member establish, maintain, and enforce written procedures to supervise the types of business in which it engages and to supervise the activities of registered representatives and associated persons that are reasonably designed to achieve compliance with the federal securities laws and NASD and FINRA Rules.

REIT Sales. Despite red flags, Ackerman allegedly failed to take reasonable steps to ensure the suitability of the REITs sold to customers. Yes, she signed off on customers' new account documents;  NO, there is no evidence that she performed a supervisory review of the suitability of the REIT purchase, including a review for unsuitable concentration. During FINRA's investigation, it was apparent to examiners that Ackerman was unable to demonstrate that she had conducted an adequate suitability review or followed up on red flags.  And while sales of REIT shares was CM Securities' prodominant - almost exclusive - sales activity, Ackerman didn't tailor the firm's WSPs to its business model. Specifically, the WSPs procedures for alternative investments did not identify financial suitability requirements and didn't include any guidance regarding a review for unsuitable concentration levels of a security or sector in a customer’s account.   These supervisory deficiencies contributed to her failure to detect the representatives' unsuitable recommendations. FINRA Sanctions. For her failures, Ackerman received a $20K fine and an 18-month suspension from serving as principal for any FINRA member.  Since she left CM in 2010, she has not been associated with a member firm. For further details, go to:  [FINRA Disciplinary Actions for July 2012] and [FINRA AWC #2009017346701].