The Financial Industry Regulatory Authority (FINRA) recently sanctioned Bedminster Financial Group, Ltd. (BFG) and Robert M. Van Pelt (Van Pelt). FINRA alleged that at least four representatives of BFG used non-BFG email accounts for securities related communications to the public, customers and prospective customers and that Van Pelt failed to retain and review these emails. FINRA also found that BFG, through its President and Chief Compliance Officer Van Pelt, failed to enforce its written supervisory procedures by failing to 1) preserve business related emails; 2) review of business related mail; 3) inspect of non-branch offices; and 4) review and approve website content.
BFG’s main office is located in Holicong, Pennsylvania. BFG employs thirty-four registered persons, had six registered branch offices, and twenty-eight non-branch offices located across the country. BFG’s primary business is the receipt of finder’s fees for private placements and Private Investment in Public Equity (PIPE) offerings. Since 1996, Van Pelt has been registered with BFG and is the firm’s President, CCO, and majority owner.
The securities laws require firms to maintain and preserve for at least three years originals of all communications received and copies of all communications sent relating to the firm’s business. BFG’s supervisory procedures required representatives to use the firm’s email account for business related communications and prohibited employees from communicating with customers or prospects through their personal email accounts unless the outside account was first approved by the firm and records of the email activity were provided to the firm. Despite BFG’s prohibition against using personal email addresses, FINRA found that at least four representatives used their unapproved personal email accounts for business-related communications without copying or forwarding these emails to the firm.
Further, FINRA found that the firm did not have any system in place to verify compliance with its procedures. BFG’s supervisory procedures required Van Pelt to review a sample of incoming and outgoing email correspondence. However, FINRA found that this procedure was not followed and instead the firm’s operations manager and two part-time unregistered persons reviewed emails. In addition, FINRA found that only emails that had been flagged through a key word search were brought to Van Pell for his review and approval.
FINRA also found that BFG operated approximately 33 non-branch offices, including the homes of representatives or other addresses out of which they worked and that BFG, acting through Van Pelt, failed to establish and implement an inspection schedule for its approximately 33 non-branch offices and performed no such inspections. Finally, FINRA found that the firm’s website contained six hyperlinked websites belonging to companies with which many of BFG’s representatives were affiliated and through which they conducted investment related businesses. FINRA found that BFG, acting through Van Pelt, failed to enforce the firm’s policies for the review and approval of representatives’ hyperlinked websites.
The attorneys at Gana LLP are experienced in handling claims involving brokerage firm’s failure to supervise its financial advisors. Our attorneys can help you detect and uncover suspicious activity in your accounts. Our consultations are free of charge and the firm is only compensated if you recover.