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NEWSLETTERS & ALERTS
Commissions Were Paid to Non-Registered Third Parties
by Howard Haykin
A San Diego, CA-based broker-dealer agreed to pay a $10K fine to settle FINRA charges that it paid commissions to unregistered entities instead of directly to the representatives.
Between May 2013 and April 2016, approximately once per month, the broker-dealer paid out commissions earned by 2 registered reps to 2 unregistered entities. Each registered rep was a co-owner of the entity to which the broker-dealer paid his commissions. All told, over $3.85 million was paid to the 2 entities.
The payments violated NASD Rule 2420 (applicable through 8/23/15) and FINRA Rules 2040 (applicable since 8/24/15), which prohibits firms to pay fees that are based on securities transactions, including commissions, to entities that are not registered as broker-dealers. A registered rep – i.e., an associated person of a firm - must be a natural person.
This case was reported in FINRA Disciplinary Actions for December 2018.
For details the case, go to ... FINRA Disciplinary Actions Online, and refer to Case #2013039590801.