BROWSE BY TOPIC
- Bad Brokers
- Compliance Concepts
- Investor Protection
- Investments - Unsuitable
- Investments - Strategies
- Investments - Private
- Rules & Regulations
- Bad Advisors
- Boiler Rooms
- Terminations/Cost Cutting
- Wall Street News
- 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
Firm President Failed to Supervise the Chief Compliance Officer
by Howard Haykin
Wayne Miiller agreed to pay a $10K fine and to not serve in any principal capacity for 6 months to settle FINRA charges that, as his member firm’s President, he failed to reasonably supervise the firm’s CCO (who also served as direct supervisor for all registered reps at a branch office of his firm).
FINRA Findings. In this case, FINRA cited Miiller for failing in his responsibilities as Accelerated’s President: (i) to monitor whether the CCO was properly exercising her delegated duties; and, (ii) to respond to red flags indicating that the firm’s systems were not adequate and/or the designated CCO was not capable of reasonably supervising a troublesome broker in the firm’s Irvine, CA branch office who engaged in excessive, unsuitable, and unauthorized transactions in customer accounts.
NOTE: Miiller joined Accelerated Capital Group in April 2010 – less than 2 years after passing the Series 7 General Securities Representative exam.
CCO had trouble surveilling trade activity. During the Relevant Period, from August 2012 to January 2016, Accelerated’s Chief Compliance Officer had trouble surveilling trade activity. She advised Miiller that she had difficulty analyzing the Firm’s trade blotter and mutual fund switch reports, and requested better surveillance tools in the form of exception reports. Miiller responded by hiring a compliance consultant to assist the CCO in her account surveillance tasks. However, when the CCO continued to experience difficulties – even with assistance from the consultant – Miiller apparently failed to recognize that the CCO simply lacked the experience and training necessary to conduct reasonable trading and customer account surveillance. [i.e., and that further action needed to be taken to address the ongoing problems.]
Trouble in dealing with a branch office broker. After being notified by the CCO that a troublesome broker (“BM”) had excessively traded mutual fund “A” shares in customer accounts, Miiller placed that broker on heightened supervision. Yet, neither the CCO nor anyone else at the firm contacted BM’s mutual fund customers. Had someone done so, Accelerated would have learned that BM’s excessive mutual fund activity also was unauthorized in the accounts of at least 9 of the 11 affected customers.
In addition, while on heightened supervision, BM began to increasingly employ an unsuitable "swing trade strategy" for the same customers for whom he had been improperly trading the "A” shares. This conduct also went undetected due to the absence of an excessive trading exception report and the CCO’s inability to detect excessive trading using the Firm's existing trade blotter.
FINANCIALISH TAKE AWAY. I find it interesting that Miiller became President of the Accelerated Capital Group just 20 months after he acquired his Series 7 license. Might Miiller’s scant brokerage experience have been a contributing factor in the supervisory failures featured in this case? YES! Of course it might have.
Why then did FINRA avoid this possible “elephant in the room?” The regulator instead focused on “plain vanilla” issues dealing with supervisory personnel and inadequate systems - which makes sense given that this is an AWC Letter.
Nevertheless, it’s frustrating that FINRA might not use one of its other forums to address the possibility that Accelerated (or any other member firm facing similar circumstances) failed to install a properly qualified individual as President - and that such a failure might have led to the supervisory violations cited in this case. [Mind you, I’m simply raising the question, and not stating that Miiller was improperly qualified.]
Bottom line - this is an issue that industry members address each and every day - and one that the industry's self-regulator needs to ensure gets proper attention.
This case was reported in FINRA Disciplinary Actions for February 2018.
For details on this case, go to ... FINRA Disciplinary Actions Online, and refer to Case #2012033566204 .