The Financial Industry Regulatory Authority (FINRA) recently sanctioned brokerage firm Foothill Securities, Inc. (Foothill) alleging between May 17, 2010, and September 16, 2012, Foothill did not have an adequate supervisory system and written procedures to monitor its securities business, failed to follow the supervisory system, and failed to establish and enforce policies reasonably designed to supervise the firm’s securities business. Also included in FIRNA’s complaint was Stephen Shipp, Jr. (Shipp), as CCO of Foothill, FINRA alleged that he was responsible for the firm’s supervisory system, its written procedures, and the enforcement of its supervisory system causing the violations.
Foothill is a dually registered broker-dealer and investment advisor firm and has been a member of FINRA since 1962. The firm has approximately 255 registered brokers operating from approximately 138 branch offices. The firm conducts a general securities business in the following products: equities, mutual funds, corporate and municipal debt, US government securities, oil and gas interests, options, private placements, direct participation programs, and variable contracts.
FINRA alleged that Foothill’s supervisory procedures were deficient in many ways. A small sample of FINRA’s findings include that between May 17, 2010 and September 16, 2012, Foothill acting through Shipp: (1) heavily relied upon a proprietary data system for the supervision of its brokers securities transactions but that the trading information captured by the proprietary system was not consistently accurate or complete; (2) allowed nine of its ”dual Office of Supervisory Jurisdiction branch offices to have two producing managers supervise each other’s activities, even though this supervisory structure is prohibited under the FINRA Rules; (3) had an inadequate supervisory system relating to the heightened supervision of its producing managers; (4) the firm’s procedures required all producing managers’ correspondence to be forwarded to the home office for review and approval by the CCO but that procedures failed to specify the details of what the CCO’s correspondence reviews would entail and how the reviews would be evidenced; (5) at least one producing manager never sent any of his correspondence to the CCO for review or approval which was not caught by the firm; (6) failed to adequately and accurately disclose the required details of certain outside business activities of its brokers in 34 of 87 sampled disclosures; (7) failed to timely update its registered representatives disclosures in at least 13 instances; (8) failed to timely file five customer complaints, and four other customer related disclosures with FINRA; (9) failed to evidence the daily review and approval of daily reports of approved private securities transactions for one of its registered representatives
Securities Lawyers Blog
Broker Daniel Vazquez (Vazquez) was recently sanctioned by The Financial Industry Regulatory Authority (FINRA) in an enforcement action that resulted in a permanent bar from the securities industry. According to the FINRA AWC (Letter of Acceptance, Waiver, and Consent) FINRA found that Vazquez failed to request termination of his suspension within three months of the date of the suspension and was automatically barred from association with any FINRA member in any capacity.
