This post continues our exploration of the Financial Industry Regulatory Authority’s (FINRA) acceptance, waiver, and consent action (AWC) that sanctioned brokerage firm Sammons Securities Company, LLC (Sammons) over allegations that Sammons failed to establish and maintain a system of supervision to comply with the securities laws.
FINRA member firms were required to conduct reviews of all outside business activities disclosed before to ensure that the disclosures complied FINRA standards. During FINRA’s investigation the regulator found that Sammons was unable to demonstrate that it had conducted a review. In addition, FINRA alleged that Sammons used a form to collect information from its brokers concerning their outside business activities but the form failed to request information sufficient to detect the occurrence of private securities transactions away from the firm.
Moreover, FINRA found that two Sammons brokers were operating registered investment advisors that held customer accounts at broker-dealers other than Sammons. FIRNA found that the representatives disclosed their advisory business as outside business activities to Sammons and those activities were approved. However, FINRA found that Sammons did not record or maintain the advisories securities transactions on the firm’s books and records, or supervise the correspondence of the business. As a result, FINRA found that the representatives’ participation in private securities transactions was unsupervised by the firm.
Finally, FINRA found that Sammons failed to conduct any independent due diligence for the structured products it recommended to customers. Instead, FINRA alleged that Sammons relied completely on the determination of its fixed income distributors to sell the structured products as sufficient evidence of suitability. FINRA found that Sammons’ failure to implement and maintain supervisory procedures for evaluating complex products violated industry rules.
Investors who have suffered losses through a brokerage firms’ failure to supervise their brokers 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.