The Financial Industry Regulatory Authority has taken disciplinary actions against certain companies for various violations.
The regulator on Aug. 10 fined FSC Securities Corp. $100,000 and ordered the company to pay $492,485.33 in restitution to customers over findings that the company executed about 6,500 purchases of leveraged, or inverse, or both inverse and leveraged exchange-traded funds in about 1,400 retail customer accounts without establishing and maintaining a supervisory system, including written procedures.
Wedbush Securities Inc. on Aug. 18 was censured and fined $110,000 over findings that it engaged in trading unit aggregation but failed to ensure that individual traders were assigned to only one aggregation unit at any time. The findings also included that the company transmitted reports that contained inaccurate, incomplete, or improperly formatted data to the order audit trail system. Additionally, FINRA found that the company, among other things, failed to provide written notification disclosing to its customer that a transaction was executed by the company at an average price, that transaction details were available upon request and/or its capacity in the transaction.
Morgan Stanley Smith Barney LLC on Aug. 22 was censured, fined $500,000 and ordered to pay $103,219.25, plus interest, in restitution to investors over findings that it regularly failed to show the correct order receipt time and/or execution on brokerage order memoranda for trades in National Market System stock executed through the company's verbal trade process by its preferred securities trading desk.
FINRA on Aug. 24 censured and fined City National Securities Inc. $250,000 over failure to supervise certain of its registered representatives to ensure their compliance with FINRA rules relating to outside business activities, private securities transactions and outside accounts.
On Aug. 21, Cetera Financial Specialists LLC, Cetera Investment Services LLC, First Allied Securities Inc., Girard Securities Inc. and Summit Brokerage Services Inc. were censured and required to provide FINRA with a remediation plan to remediate eligible customers who qualified for, but did not receive, the applicable mutual fund sales-charge waiver. As part of this settlement, the companies agreed to pay restitution to eligible customers in the amount of about $572,260, $1.4 million, $876,915, $102,765 and $356,915, respectively.
The regulator found that the companies disadvantaged certain retirement plan and charitable organization customers who were eligible to purchase class A shares in certain mutual funds without a front-end sales charge. The findings stated that these eligible customers of these companies were instead sold class A shares with a front-end sales charge or class B or C shares with back-end sales charges and higher ongoing fees and expenses.