FINRA Broker Fraud and Mismanagement Arbitration Attorney, Russell L. Forkey, Esq.
UVEST Financial Services Group, Inc. (CRD #13787, Charlotte, North Carolina) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $75,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it allowed registered representatives to operate registered investment advisory (RIA) programs not affiliated with the firm. The findings stated that these RIA programs were operated by firm registered representatives who were dually registered as representatives and RIAs. The findings also stated that the RIA programs maintained accounts away from the firm and had assets under management of over $350 million. The findings also included that the dually registered representatives who operated these RIA programs participated in the execution of securities transactions, through broker-dealers other than the firm, involving mostly equity investments. FINRA found that because the firm viewed these RIA programs as outside business activities, the firm did not comply with its obligations under NASD Rule 3040 with regard to the RIA programs, including complying with supervisory obligations and the obligation to record the transactions on the firm’s books and records. FINRA also found that the firm failed to record the transactions executed away from the firm in its books and records as required by NASD Rule 3040; failed to supervise registered representative – investment adviser (RR/IA)s’ participation in the securities transactions executed through broker dealers other than the firm; and failed to establish, maintain and enforce a supervisory system to supervise the RR/IA activities reasonably designed to provide an understanding of the nature of the services provided by its RR/IAs, the scope of each RR/IA’s authority, and the suitability of the transactions in which the RR/IA participated. In addition, FINRA determined that the firm did not have WSPs to specifically address supervision of the securities activities of outside RIAs until a later date. (FINRA Case #2008012048601).
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