The Financial Industry Regulatory Authority released its report covering the disciplinary actions it took against financial companies in December 2020.
FINRA censured and fined LPL Financial LLC $6.5 million. The agency found that the company failed to establish and maintain a supervisory system designed to achieve compliance with regulatory obligations including record retention, screening of associated persons, and supervision of consolidated reports. LPL Financial failed to retain electronic records in the required format and notify FINRA prior to employing electronic storage media. The failure affected at least 87 million records and led to the permanent deletion of over 1.5 million customer communications maintained by a third-party data vendor. A former company representative exploited reporting and supervisory deficiencies to perpetrate a Ponzi scheme through which he converted at least $1 million of the LPL Financial's customers' money, according to FINRA.
FINRA censured and fined Transamerica Financial Advisors Inc. $4.4 million, as well as ordered the company to pay $4.4 million in restitution to customers, which includes $321,167 in interest. The agency found that Transamerica Financial failed to supervise its registered representatives' variable annuity recommendations and made disclosures in connection with variable annuity exchange recommendations that contained materially inaccurate information or omitted material information. The findings also stated that the company and its representatives received compensation from new variable annuity sales in the form of gross dealer commissions in excess of $591 million. The amount represents more than 40% of Transamerica Financial's total revenue. The company did not train and ensure proper procedures for supervisors to follow.
Deutsche Bank Securities Inc. was censured and fined $2.5 million. FINRA found that the company did not establish and maintain a supervisory system designed to achieve compliance with its record retention obligations. Deutsche Bank Securities also stored records electronically including its general ledger, supervisory procedures, customer statements and onboarding documents, and notices to customers. These records were stored without notifying the examining authority 90 days prior and without an audit system providing for accountability regarding inputting of records.
SG Americas Securities LLC was censured and fined $1 million for failing to establish and maintain a supervisory system and procedures designed to comply with its recordkeeping requirements. The company also failed to comply with retention requirements and to comply with the requirements with respect to storing certain required records electronically. These records were stored without notifying the examining authority 90 days prior and without an audit system.
Cetera Advisor Networks LLC was fined $750,000 and its units Cetera Advisors LLC and Cetera Financial Specialists LLC were fined $150,000 and $100,000, respectively. FINRA found that the companies failed to supervise certain private securities transactions of dually registered representatives who were associated with outside registered investment advisers. The companies also had unreasonable supervisory systems to supervise private securities transactions suggested by the dually registered representatives through the outside RIAs.
FINRA censured and ordered RBC Capital Markets LLC to pay $685,520 in restitution to customers, plus interest. The agency found that the company failed to establish and maintain a supervisory system to supervise representative recommendations to customers to purchase particular share classes of 529 savings plans. RBC Capital Markets did not provide its representatives adequate guidance regarding the importance of considering share-class differences when recommending 529 plans and had no procedures requiring supervisors to review 529 plan share-class recommendations for suitability.
FINRA censured and fined Barclays Capital Inc. $650,000 for failing to timely report the Trade Reporting and Compliance Engine transactions in TRACE-eligible corporate bonds and agency debt securities. The agency found that the majority of the late corporate transactions were caused by manual trade amendments or late manual entry. FINRA also found that the company over-reported treasury transactions to TRACE, which occurred in connection with transactions executed between Barclays Capital and its affiliate.
Citigroup Global Markets Inc. was censured and ordered to pay $514,932, plus interest, in restitution to customers. FINRA found that the company did not establish and maintain a supervisory system to supervise representative recommendations to customers to purchase particular share classes of 529 savings plans. Citigroup Global Markets did not consistently apply the same level of supervisory review and approval to 529 plan accounts and transactions that occurred off-platform.
PHX Financial Inc. was censured, fined $50,000 and ordered to pay $356,711, plus interest, in restitution to customers. FINRA also ordered the company to review and revise its supervisory system and Written Supervisory Procedures regarding supervision of excessive trading and churning. The agency found that PHX Financial and its President Robert Charles Delaplain failed to maintain WSPs regarding excessive trading and used manual reviews of a daily trade blotter that did not reflect patterns of trading, cost-to-equity ratios and turnover ratios. Delaplain was suspended from association with any FINRA member firm in any principal capacity for six months.
The companies all neither admitted nor denied FINRA's findings.
