South Florida Arbitration & Litigation Lawyer Blog
Stock Broker Misconduct, Fraud, Misrepresentation and Breach of Fiduciary Duty FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.
January, 2012:
Park Avenue Securities LLC (CRD #46173, New York, New York) 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 conducted an inadequate investigation of its representatives’ involvement in a Ponzi scheme and of allegations two registered representatives made. The findings stated that the firm became aware that two of its registered representatives had participated in unapproved private securities transactions by facilitating investments in the Ponzi scheme for themselves and others, some of whom were firm customers, without notifying the firm or obtaining its permission. The firm initiated an investigation regarding their conduct and to determine whether any other registered representatives were involved in the Ponzi scheme. The findings also stated that the firm sent a questionnaire to its registered representatives in two states soliciting information about any involvement in the Ponzi scheme. Notwithstanding the allegation two registered representatives made that one of the firm’s insurance supervisors knew about their involvement with the Ponzi scheme, the firm permitted him to be one of the people collecting responses to the firm’s questionnaire. The findings also included that the firm failed to fully investigate the extent of the insurance supervisor’s involvement with the Ponzi scheme despite evidence discovered later that should have led the firm to conclude that he was involved. FINRA found that counsel for the two registered representatives informed the firm that a member of the firm’s supervisory staff had suggested that the registered representatives destroy documents and provide misleading information in connection with the firm’s internal investigation. Under the circumstances, the firm took inadequate steps to investigate these allegations. FINRA also found that the firm had an inadequate system for reviewing electronic communications. The firm’s computer system allowed compliance staff in branch offices, in certain circumstances, to review their own email as well as the email of their supervisors. (FINRA Case #2009016911203).