South Florida Arbitration & Litigation Lawyer Blog
FINRA Securities Fraud and Mismanagement Attorney, Russell L. Forkey, Esq.
January, 2011:
Janney Montgomery Scott, LLC (CRD #463, Philadelphia, Pennsylvania) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $175,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to establish certain elements of an adequate AML program reasonably designed to achieve and monitor its compliance with the requirements of the Bank Secrecy Act and implementing regulations promulgated by the Department of Treasury. The findings stated that the firm failed to establish policies and procedures reasonably expected to detect and cause the reporting of transactions required under 31 USC 5318(g) by failing to provide branch office managers with reports that contained adequate information to monitor for potential money-laundering and red flag activity; and for the firm’s compliance department to perform periodic reviews of wire transfer activity, require either branch managers or the AML compliance officers to document reviews of AML alerts in accordance with firm procedures, identify the beneficial owners and/or agents for service of process for some foreign correspondent banks accounts, and establish adequate written policies and procedures that provided guidelines for suspicious activity that would require the filing of a Form SAR-SF. The findings also stated that the firm failed to establish policies and procedures that required ongoing AML training of appropriate personnel related to margin issues, entering new account information, verifying physical securities and handling wire activity. The findings also included that the firm failed to ensure that its third-party vendor verified new customers’ identities by using credit and other database cross-references, and after the firm determined that the vendor’s lapse was resolved, it failed to retroactively verify customer information not previously subjected to the verification process.
FINRA found that the firm failed to establish procedures reasonably expected to detect and cause the reporting of suspicious transactions required under 31 USC 5318(g), in that it failed to include in its AML review the activity in retail accounts institutional account registered representatives serviced. FINRA also found that the firm failed to review accounts that a producing branch office manager serviced under joint production numbers, and failed to evidence in certain instances timely review of letters of authorization, correspondence, account designation changes, trade blotters, branch manager weekly review forms and branch manager monthly reviews; failed to follow procedures intended to prevent producing branch office managers from approving their own errors; and failed to follow procedures intended to prevent a branch office operations manager from approving transactions in her own account and an assistant branch office manager from reviewing transactions in accounts he serviced. In addition, FINRA determined that the firm failed to establish procedures for the approval and supervision related to employee use of personal computers and, during one year, permitted certain employees to use personal computers the firm did not approve or supervise.
Moreover, FINRA found that for one year, the firm’s annual acknowledgement form failed to include a question requiring its registered representatives to disclose outside securities accounts and the firm could not determine how many remained unreported due to the supervisory lapse. Furthermore, FINRA found that the firm failed to follow policies and procedures requiring the pre-approval and review of the content of employees’ radio broadcasts, television appearances, seminars and dinners, and materials distributed at the seminars and dinners; representatives conducted seminars that were not pre-approved by the firm’s advertising principal as required by its written procedures; the firm failed to maintain in a separate file all advertisements, sales literature and independently prepared reprints for three years from date of last use; and a branch office manager failed to review a registered representative’s radio broadcast.
FINRA found that a branch office manager failed to maintain a log of a registered representative’s radio broadcasts and failed to tape and/or maintain a transcript of the broadcasts and there was no evidence a qualified principal reviewed or approved the registered representative’s statements. FINRA also found that branch office managers did not retain documents reflecting the nature of seminars, materials distributed to attendees or supervisory pre-approval of the seminars; retain transcripts of a representative’s local radio program and TV appearances or document supervisory review or approval of materials used; and retain documents reflecting the nature of a dinner or seminar conducted by representatives or materials distributed.
In addition, FINRA determined that the firm distributed a document, Characteristics and Risks of Standardized Options, that was not current, and the firm lacked procedures for advising customers with respect to changes to the document and failed to document the date on which it was sent to certain customers who had recently opened options accounts. The findings also stated that the firm’s compliance registered options principal did not document weekly reviews of trading in discretionary options accounts. The findings also included that the firm failed to record the identity of the person who accepted each customer order because it failed to update its order ticket form to reflect the identity of the person who accepted the order. FINRA found that the firm failed to review Bloomberg emails and some firm employees’ instant messages. (FINRA Case #2007009458001).