South Florida Arbitration & Litigation Lawyer Blog
Selling Away and Unapproved Outside Business Activity Fraud, Negligence and Negligent Supervision FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.
December, 2011:
Institutional Capital Management, Inc. (CRD #41055, Houston, Texas) and Daniel Lee Ritz Jr. (CRD #1977521, Registered Principal, Katy, Texas) submitted a Letter of Acceptance, Waiver and Consent in which the firm was fined $65,000 and Ritz was suspended from association with any FINRA member in any principal capacity for four months. In light of Ritz’ financial status, no monetary sanction was imposed. Without admitting or denying the findings, the firm and Ritz consented to the described sanctions and to the entry of findings that the firm permitted registered persons assigned to a branch office to utilize outside email accounts to conduct firm business, even though the firm did not have a system or procedure in place to capture, preserve and monitor those emails; consequently, the firm failed to preserve all firm-related email communications of registered persons assigned to that branch as required. The findings stated that the firm failed to perform any supervisory review of email communications of registered persons assigned to that branch, and that Ritz permitted a firm registered representative to engage in investment advisory activity through the representative’s state-registered investment advisor (RIA) and failed to supervise that activity. Ritz was the principal responsible for supervising the representative, but failed to supervise any facet of his investment advisory business and was generally unaware of what it entailed. The findings also stated that as a result of Ritz’ lack of supervision, the representative was able to engage in extensive selling-away misconduct without the firm’s detection, raising more than $5 million from investors through sales of promissory notes without the firm’s knowledge. The findings also included that the firm failed to obtain all required information for some customers who purchased securities through the firm in private placement offerings.
The suspension is in effect from November 21, 2011, through March 20, 2012. (FINRA Case #2010022679801).