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Regulatory Sanctions

WWW: CCO, 35-Year Vet, Gets Fined & Suspended Over WSP Deficiencies

April 12, 2017
A CCO takes the blame when a firm's Written Supervisory Procedures (WSP’s) don’t comport with the actual steps taken by personnel to supervise and surveil a firm’s business activities. The WSPs, in turn, must identify all necessary steps, as mandated by applicable rules and regulations and the firm’s internal policies and procedures. This includes evidencing the completion of supervisory and surveillance procedures.


Phillip Palmer, of Tulsa, OK, agreed to a $10K fine and a 2-1/2-month suspension as a principal to settle FINRA charges that his member firm, through Palmer, failed to establish, maintain, and enforce an adequate supervisory system and WSPs concerning the supervision of electronic correspondence and external email addresses.


ABOUT THE RESPONDENT.    Palmer entered the securities industry in March 1982. Prior to working for First Independent Financial Services (“FIFS”) from 2004 to 2016, Palmer had been associated with the following firms:  (i) Connecticut Mutual Fincl Svcs; (ii) Lowry Fincl Svcs; (iii) Patterson Icenogle; (iv) Mutli-Financial Securities Corp. After being U5’d by FIFS, Palmer went to work for Royal Alliance Associates.


Palmer held the following licenses: Series 6, 7, and 22; Principal / Supervisory Series 4, 24 and 53, and he had no prior disciplinary history.


FINRA’S SPECIFIC FINDINGS.    Palmer was the CEO, CCO and Chief Supervisory Officer of FIFS for nearly 2 years - from 3/11/13 through 2/4/15. He was also directly responsible for the establishment, maintenance and enforcement of the Firm's supervisory systems and WSP’s during that time period.  


From 3/11/13 through 2/14/15, the WSP’s did not adequately address how the firm:


  • conducted and evidenced its review of e-correspondence, and
  • ensured that it was archiving all pre-approved external email addresses that were being used by registered reps and personnel in correspondence relating to the firm’s securities business.

►  FINRA noted that 4 registered reps and one non-registered fingerprint person used external email addresses to engage in correspondence relating to the firm’s securities business - and these email addresses were not archived by the firm


From 1/1/14 through 10/31/14, the WSP’s did not adequately address how the firm:


  • surveilled customer monetary withdrawals from variable annuities.

►  Palmer flagged V/A withdrawals totaling $974,000 for 7 of a registered rep’s customers; however, he failed to take reasonable steps to verify the V/A transactions and purpose of the withdrawals – because he never contacted the customers directly regarding his concerns and instead relied primarily on the registered rep’s explanations for the withdrawal activity.


This case was reported in FINRA Disciplinary Actions for February 2017.

For details on this case, go to … FINRA Disciplinary Actions Online, and refer to Case #2015043295203.