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Retail Broker-Dealers Fined for Violations by FINRA
Retail Communications Violations
Non-compliant Retail Communications
A broker-dealer has been censured and fined $40,000 by FINRA due to violations related to retail communications for private placement investments. The firm was found to have failed to meet the content standards in FINRA Rule 2210 regarding two emails discussing potential investment opportunities in pre-IPO stage companies.
Untimely Filing of Offering Documents
Additionally, the same firm was alleged by FINRA to have failed to timely file offering documents for 92 private placement investments. FINRA found that, on average, the firm’s filing of these documents was 163 days late, significantly delayed from the first sale of the offerings.
Inadequate Real Estate Investment Due Diligence
Improper Investment Recommendations
Another broker-dealer has been ordered to pay $800,000 in restitution and penalties by FINRA for improper investment recommendations related to real estate-focused private placements. The firm allegedly recommended these investments without conducting adequate due diligence, leading to investor losses when the investments failed.
Overlooking Regulatory Requirements
The firm violated its reasonable basis suitability obligation by failing to thoroughly assess the offerings it recommended to customers. When the real estate company and its affiliates filed for bankruptcy, investors suffered losses due to the lack of comprehensive due diligence by the firm.
Complex Trading Strategies Scrutinized
High-Risk Trading Strategy
A Georgia-based brokerage firm has agreed to pay $2 million in partial restitution to resolve claims by FINRA regarding the recommendation of a high-risk trading strategy involving exchange-traded notes linked to volatility. The firm was found to have failed to understand and communicate the risks of the strategy to over 350 customers.
Incomplete Risk Assessment
Despite warnings in the strategy’s disclosure documents, the firm kept customers invested in the high-risk ETN without properly assessing the potential losses. This led to significant losses for customers when the value of the ETN plummeted during a surge in volatility in 2018.
Noncompliance with Information Requests
Regulatory Violations
A New York-based brokerage firm has been fined $115,000 by FINRA for noncompliance with various FINRA rules related to failing to respond to information requests under Rule 8210. The firm did not fully comply with the requests until after FINRA pursued multiple follow-up requests and expedited proceedings to compel its compliance.
Enhanced Compliance Practices
In addition to the financial penalty, the firm was required to strengthen its compliance practices and supervisory framework. The settlement also includes provisions aimed at bolstering the firm’s internal controls and improving its responsiveness to regulatory requests in the future.
Form CRS Disclosure Failures
Lack of Legal History Disclosure
A brokerage firm was censured and fined $30,000 by FINRA for failing to disclose its complete legal and disciplinary history on its Form CRS. The firm did not meet the necessary obligations under SEC’s Regulation BI, which mandates the delivery of Form CRS to retail customers.
Importance of Regulatory Compliance
The firm’s failure to provide accurate information on its Form CRS violated rules aimed at increasing transparency for investors. As part of the settlement, the firm agreed to take corrective actions to ensure compliance with regulatory requirements and enhance transparency for customers.
The information in the article is for informational purposes only. It does not constitute any investment advice. The author and CryptoBlockNews.com are not responsible for your profits or losses arising from your investments. Investment is ultimately based on many foundations such as knowledge, accumulation, experience, research and personal decisions.
