Securities Lawyers Blog
The Financial Industry Regulatory Authority (FINRA) sanctioned three firms, H. Beck, Inc. (H. Beck), LaSalle St. Securities, LLC (LaSalle), and J.P. Turner & Company, LLC (JP Turner) – with fines of $425,000, $175,000 and $100,000, respectively concerning inadequate supervision of consolidated reports provided to customers.
As a background, a consolidated report is a single document that combines information regarding a customer’s financial holdings. Consolidated reports are used to supplement, but do not replace, official account statements disseminated by brokerage firms and market makers. FINRA released a regulatory notice reminding firms that consolidated reports must be clear, accurate and not misleading. Because these reports are not official reports FINRA is concerned that if consolidated report making is not rigorously supervised there is the potential for communications to be inaccurate, confusing, or misleading to customers. Consolidated reports can also be used for fraudulent or unethical purposes.
In the agency’s findings, FINRA determined that numerous registered representatives of the three firms prepared and disseminated consolidated reports to customers either without adequate review or any prior review by a principal. In particular, H. Beck and J.P. Turner did not have any written procedures specifically addressing the use and supervision of consolidated reports. In addition, while LaSalle had written procedures related to consolidated reports, it failed to enforce the procedures.
Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, stated in FINRA’s press release that, “Inadequate controls around consolidated reporting create the risk that unscrupulous representatives will provide inaccurate and misleading reports to their clients to conceal fraud and theft. These actions along with previous actions involving consolidated reports should be a message to firms that we will continue to examine for this issue and sanction firms that are not supervising this function properly.”
This isn’t the first time that FINRA has come down on JP Turner’s practices that our firm has written. Those articles can be accessed here (JP Turner Sanctioned By FINRA Over Non-Traditional ETF Sales and Mutual Fund Switches), here (JP Turner Supervisor Sanctioned Over Failure to Supervise Mutual Fund Switches), here (SEC Finds that Former JP Turner Broker Ralph Calabro Churned A Client’s Account), and here (JP Turner failed to establish and enforce reasonable supervisory procedures to monitor the outside brokerage accounts of its registered representatives.)
JP Turner has been FINRA firm since 1997. JP Turner engages in a wide range of securities transactions including the sale of municipal and corporate debt securities, equities, mutual funds, options, oil and gas interests, private placements, variable annuities, and other direct participation programs. JP Turner employs approximately 422 financial advisors and operates out of 185 branch offices with principal offices in Atlanta, Georgia.
Investors who have suffered losses may be able recover their losses through securities arbitration. The attorneys at Gana Weinstein LLP are experienced in representing investors in cases of false representations and when brokerage firms fail to supervise their representatives. Our consultations are free of charge and the firm is only compensated if you recover.