Articles Posted in FINRA AWC

A unit of TD Bank, a US subsidiary of Canada’s Toronto-Dominion Bank, has agreed to pay a $125,000 fine to resolve allegations that it failed to record the required review of 3.1 million emails.

FINRA requires that all securities-related correspondence between registered representatives and the public receive supervisory review, pursuant to Rule 3010:

“Each member shall develop written procedures that are appropriate to its business, size, structure, and customers for the review of incoming and outgoing written (i.e., non-electronic) and electronic correspondence with the public relating to its investment banking or securities business, including procedures to review incoming, written correspondence directed to registered representatives and related to the member’s investment banking or securities business to properly identify and handle customer complaints and to ensure that customer funds and securities are handled in accordance with firm procedures.”

Credit Suisse Securities U.S.A. LLC has agreed to pay $16.5 million to resolve Financial Industry Regulatory Authority (FINRA) allegations that the firm violated anti-money laundering (AML) program regulations, supervision requirements and other policies, FINRA reported Monday.

Specifically, FINRA found that Credit Suisse’s U.S. division relied solely on registered representatives to report suspicious trading, who then failed to escalate or investigate high-risk activity. In addition, the firm inadequately implemented its automated surveillance system, opted not to use available suspicious activity identification scenarios and failed to investigate suspicious activities that it did detect.

Considering the significant $16.5 million fine and FINRA’s increased focus on AML violations, broker-dealers should take this opportunity to re-examine their own AML programs for potential deficiencies.

The Financial Industry Regulatory Authority (FINRA) has fined Merrill Lynch, Pierce, Fenner & Smith Inc. $6.25 million for inadequately supervising its customers’ use of leverage in their Merrill brokerage accounts. The firm has also agreed to pay approximately $780,000 in restitution to 22 customers whose portfolios were over concentrated and highly leveraged in high-risk Puerto Rican securities, FINRA announced Wednesday.

FINRA’s recent sanctions involve Merrill Lynch’s handling of customer “loan management accounts” (LMAs), lines of credit that allow customers to borrow money from affiliated banks using their brokerage account securities as collateral.

FINRA claims that, between January 2010 and November 2014, Merrill Lynch “lacked adequate supervisory systems and procedures regarding its customers’ use of proceeds” from these LMAs.

VALIC Financial Advisors Inc. has agreed to pay $1.75 million to resolve Financial Industry Regulatory Authority (FINRA) allegations that the firm failed to implement reasonable systems to address and review conflicts of interest created by its compensation policy, FINRA reported Monday.

The Houston-based subsidiary of American International Group Inc. allegedly paid its representatives financial incentives to encourage clients to transfer their assets into VALIC’s in-house products and denied compensation to representatives who urged customers toward non-VALIC products.

VALIC Compensation Policy Yields 610% Sales Growth

In 2015 alone, the Financial Industry Regulatory Authority (FINRA) brought more than 1,510 disciplinary actions, charged $95.1 million in fines and ordered $96.6 million in restitution payments.

Those violations resulting in the largest fines and monetary sanctions imposed in 2015 provide a good indication of the deficiencies FINRA takes most seriously and plans to target in the future. FINRA members will want to pay particular attention to these areas in 2016.

FINRA imposed its top five fine and restitution amounts in 2015 for (1) failing to waive mutual fund sales charges, (2) supervisory failures in Puerto Rico securities, (3) engaging in unsuitable mutual fund transactions, (4) supervisory failures related to trade surveillance, trade confirmations delivery and complex product sales, and (5) selling unregistered microcap shares and related AML violations.