BROWSE BY TOPIC
- Bad Brokers
- Compliance Concepts
- Investor Protection
- Investments - Unsuitable
- Investments - Strategies
- Wall Street News
- Investments - Private
- Rules & Regulations
- Bad Advisors
- Boiler Rooms
- Terminations/Cost Cutting
- General News
- Donald Trump & Co.
- Regulatory Sanctions
- Big Banks
Stories of Interest
- Sarah ten Siethoff is New Associate Director of SEC Investment Management Rulemaking Office
- Catherine Keating Appointed CEO of BNY Mellon Wealth Management
- Credit Suisse to Pay $47Mn to Resolve DOJ Asia Probe
- SEC Chair Clayton Goes 'Hat in Hand' Before Congress on 2019 Budget Request
- SEC's Opening Remarks to the Elder Justice Coordinating Council
- Massachusetts Jury Convicts CA Attorney of Securities Fraud
- Deutsche Bank Says 3 Senior Investment Bankers to Leave Firm
- World’s Biggest Hedge Fund Reportedly ‘Bearish On Financial Assets’
- SEC Fines Constant Contact, Popular Email Marketer, for Overstating Subscriber Numbers
- SocGen Agrees to Pay $1.3 Billion to End Libya, Libor Probes
- Cryptocurrency Exchange Bitfinex Briefly Halts Trading After Cyber Attack
- SEC Names Valerie Szczepanik Senior Advisor for Digital Assets and Innovation
- SEC Modernizes Delivery of Fund Reports, Seeks Public Feedback on Improving Fund Disclosure
- NYSE Says SEC Plan to Limit Exchange Rebates Would Hurt Investors
- Deutsche Bank faces another challenge with Fed stress test
- Former JPMorgan Broker Files racial discrimination suit against company
- $3.3Mn Winning Bid for Lunch with Warren Buffett
- Julie Erhardt is SEC's New Acting Chief Risk Officer
- Chyhe Becker is SEC's New Acting Chief Economist, Acting Director of Economic and Risk Analysis Division
- Getting a Handle on Virtual Currencies - FINRA
We seek to provide information, insights and direction that may enable the Financial Community to effectively and efficiently operate in a regulatory risk-free environment by curating content from all over the web.
Stay Informed with the latest fanancialish news.
NEWSLETTERS & ALERTS
CCO Flunked his Supervision of OBAs and PSTs
by Howard Haykin
The Chief Compliance Officer with Osprey Partners agreed to pay a $5K fine and not serve in any principal capacity for 2 months to settle FINRA charges that he failed to reasonably supervise the private securities transactions of his member firm’s registered reps.
The individual in this case had 26 years’ experience with 14 firms, and held 3 Principal/Supervisory licenses: Series 4 (ROP), Series 8 (General Securities Sales Supervisor - Options), Series 23 (General Securities Sales Supervisor).
FINRA FINDINGS. While associated with Osprey between June 2016 and May 2017, the CCO was responsible for reviewing and approving the outside business activities ("OBAs") and private securities transactions (“PSTs”) of the firm’s registered reps. In keeping with that responsibility, he approved certain of Osprey's brokers' OBAs with BCG, a self-described "multi-strategy investment holding company located in New York City." Through BCG, the registered reps offered and sold more than $8 million in promissory notes in BCG and in BIF, a fund marketed by BCG involving real-estate investments in Belize; compensation was paid directly by BCG.
The CCO went wrong in that he … failed to reasonably supervise those transactions - in particular, by not performing due diligence on the BCG or BIF offerings. He instead delegated due diligence authority to one of Osprey’s registered reps who was himself a principal of the holding company (BCG) and, therefore, not in a position to independently review the merits of BCG or BIF.
[The particular registered rep was barred in October 2017 for failing to respond to FINRA’s request for information. At the time of the sanction, he had 1 year’s experience with 3 firms].
FINANCIALISH TAKE AWAYS. The sanctioned CCO in this case clearly used bad judgment. He improperly delegating due diligence responsibility to a registered rep who had 2 black marks going against him:
- he was a principal with the outside business in question; and,
- he had less than one year’s experience in the securities industry and, before joining Osprey in 2016, he had last been associated with a FINRA member firm in 2013.
Another issue in this case is whether there might have been anything underhanded about, or fraudulent with, BCG or its BIF fund. That could not be determined because FINRA offers no details, and a Google search got no result. That said, what are we to make of the fact that registered rep “MM” was booted out of the industry in October 2017 for failing to provide information to FINRA? Hmmm!
This case was reported in FINRA Disciplinary Actions for June 2018.
For details on this case, go to ... FINRA Disciplinary Actions Online, and refer to Case #2017053992302.