South Florida Arbitration & Litigation Lawyer Blog
FINRA Arbitration Attorney, Russell L. Forkey, Esq.
June, 2011:
Canaccord Genuity, Inc. fka Canaccord Adams, Inc. (CRD #1020, Boston, Massachusetts) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured, fined $22,500, required to review its supervisory system and procedures concerning research reports and the supervision of research analysts for compliance with FINRA rules and federal securities laws and regulations, and to certify in writing within 90 days that the firm completed its review and that it currently has in place systems and procedures reasonably designed to achieve compliance with those rules, laws and regulations. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to adopt and implement WSPs reasonably designed to supervise its research analysts and ensure that its research reports complied with NASD Rule 2711. The findings stated that although the firm maintained some relevant WSPs, those procedures did not provide any real guidance to its employees about the specific steps they needed to take to achieve compliance with Rule 2711. The findings also stated that the WSPs required that all public appearances by firm analysts be approved by the research director, that the appropriate disclosures be made to the media outlet, that a record documenting the disclosures provided to the media be maintained, and that the firm’s marketing department receive a copy of such disclosure. The findings also included that the WSPs made the research analyst responsible for meeting these obligations but provided little or no guidance on how these tasks could be successfully carried out or supervised. FINRA found that the WSPs contained provisions broadly describing what portions of draft research reports could and could not be provided to covered companies, but failed to provide specific guidance to firm employees regarding the manner in which these requirements were to be fulfilled. FINRA also found that the firm’s WSPs permitted the research department to send sections of a research report to a subject company before publication to verify the accuracy of information in those sections, provided that a complete draft of the research report was first provided to the compliance department. In addition, FINRA determined that the firm sent research report excerpts to a subject company before its compliance department had received a complete draft of the report, and in one of those instances, the complete draft was not sent to the compliance department. Moreover, FINRA found that in connection with public appearances by its research analysts, the firm failed to retain records that were sufficient to demonstrate compliance by those analysts with the disclosure requirements of NASD Rule 2711(h). (FINRA Case #2009016251601)