Capitol Securities Management, Inc. (CRD #14169, Glen Allen, Virginia)
FINRA recently announced that on or about May 25, 2018, Capitol Securities Management, Inc. executed an Acceptance, Waiver and Consent in which the firm was censured, fined $100,000 and ordered to pay $44,740.33, plus interest, in restitution to customers. Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to establish, maintain and enforce a supervisory system and WSPs reasonably designed to detect and prevent unsuitable short-term trading in unit investment trusts (UITs). The findings stated that the firm had no procedures to specifically address the suitability concerns raised by short-term trading in UITs. While the firm instituted a policy requiring the submission of a UIT switch form to detect the premature sales of UITs, the policy was not enforced. In addition, the firm had no surveillance or exception reports designed to detect unsuitable short-term trading of UITs. At least three firm representatives recommended and effected short-term trades of UITs in their customers’ accounts. In addition, on several occasions, these representatives recommended that their customers use the proceeds from the short-term sale of a UIT to purchase another UIT with identical investment objectives. As a result of this trading, customers paid excess sales charges in the amount of approximately $44,740.33. The findings also stated that the firm failed to retain instant messages from employees, including its senior management and compliance staff. (FINRA Case #2017052215401).
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