The Financial Industry Regulatory Authority (FINRA), in an acceptance, waiver, and consent action (AWC), sanctioned brokerage firm Global Brokerage Services, Inc. (Global) over allegations that from approximately February 2011, to August 2013, Global failed to establish and enforce a reasonable supervisory system regarding the use of consolidated reports by registered brokers with the firm. FINRA found that Global’s brokers provided consolidated reports to their customers that lacked required disclosures and/or contained misleading information. ln addition, FINRA alleged that one the brokers disseminated consolidated reports that included his own inaccurate and potentially misleading valuations for non-traded REITs and other illiquid investments.
Global has been a FINRA member since 1995, employs fourteen registered representatives, and its main office is in Hunt Valley, Maryland.
FINRA found that certain of Global’s brokers created consolidated reports using Morningstar or Excel for distribution to their customers. FINRA alleged that Global failed to have written supervisory procedures specific to consolidated reports. Instead, FINRA determined that consolidated reports at Global were treated as correspondence requiring only a sample (10%) be reviewed on a quarterly basis.
FINRA also alleged that Global’s procedures also did not address necessary disclosures to customers. FINRA’s review of the reports concluded that they failed to provide complete and appropriate disclosures and excluded information needed to have a sound basis for evaluating the information in the consolidated reports.
FINRA also found that broker Robert McKoy provided consolidated reports on a quarterly basis for 50-60 customers that included his own potentially misleading valuation for the ‘estimated value of non-traded REITs and illiquid investments. The consolidated reports reviewed by FINRA initially lacked any disclosure statement but later, at Global’s direction, he added a disclosure that inaccurately stated the asset valuations came from third-party providers. However, FINRA alleged that Global’s supervisory personnel were aware that the McKoy was using his own valuations for certain assets and that his valuations differed from the issuers’ valuations.
Investors who have suffered losses through investments in illiquid investments such as non-traded REITs may be able recover their losses through arbitration. The attorneys at Gana LLP are experienced in representing investors in cases where brokerage firms fail to supervise their representatives sale of unsuitable investment products. Our consultations are free of charge and the firm is only compensated if you recover.