South Florida Customer Protection and Negligent Supervision FINRA Arbitration and Litigation Attorney:

SEC Charges Texas-Based Brokerage Firm With Violating Supervisory and Customer Protection Rules:

The Securities and Exchange Commission recently charged an Irving, Texas-based brokerage firm with violating key customer protection rules after failing to adequately supervise registered representatives who misappropriated customer funds.

H.D. Vest Investment Securities agreed to settle the charges by paying a financial penalty and retaining an independent compliance consultant to improve its supervisory controls.

According to the SEC’s order instituting a settled administrative proceeding, H.D. Vest has more than 4,500 registered representatives typically working as independent contractors who also operate tax businesses outside of their securities businesses. H.D. Vest failed to have proper policies and procedures in place to monitor its representatives’ outside business activities, and as a result some representatives used their outside businesses to defraud brokerage customers in such ways as transferring or depositing customer brokerage funds into their outside business accounts.

The SEC’s order further finds that H.D. Vest did not follow customer protection rules in the wake of the wrongdoing by its representatives. Under these rules to protect customer funds and securities in the possession of broker-dealers, H.D. Vest was required to make certain calculations and, if necessary, deposit funds into a reserve account for the benefit of customers who were harmed by the representatives’ misconduct. H.D. Vest neither made the calculations nor maintained a reserve account.

The SEC’s order finds that H.D. Vest violated the supervision requirements of Section 15(b)(4)(E) of the Securities Exchange Act of 1934 as well as the customer protection rules found in Section 15(c)(3) of the Exchange Act and in Rule 15c3-3. H.D. Vest also violated the document preservation requirements in Section 17(a) of the Exchange Act and in Rule 17a-4(b)(4). H.D. Vest consented without admitting or denying the findings in the SEC’s order to cease and desist from committing these violations and pay a $225,000 penalty. The representatives involved in the misconduct have since been the subject of criminal, civil, or FINRA enforcement actions.

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of elder abuse, exploitation and securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.

At the Boca Raton Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.