Subscribe to our mailing list

* indicates required







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.




Regulatory Sanctions

Commissions Were Paid to Non-Registered Third Parties

January 10, 2019

by Howard Haykin


Who’s a securities broker? That question arose during a routine cycle exam, where FINRA learned that a broker-dealer was paying commissions earned by certain of its registered reps to unregistered entities. While the fine was small, it was completely unnecessary.


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.