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SEC Warns Brokerages To Monitor Sales Of Risky Products

The SEC alerted brokerages that they need to monitor the sales of risky complex investments to retail clients better. The agency stated that after analyzing 26,600 transactions amounting to $1.25 billion of structured securities products showed a large number of occasions when investments were inappropriate for the buyers. Currently, brokers are held to a suitability standard, meaning they can only sell products that meet a client's objectives and risk tolerance. “In these examinations, staff observed not only indications that the examined firms' suitability controls may be weak, but also significant weaknesses in supervision and implementation of internal suitability and supervisory procedures across branches of the same firm,” the alert issued by the SEC states. “The risk alert is intended to raise awareness of these types of weaknesses in order for registrants to consider them in their own compliance programs.” The SEC investigated ten branch offices of broker-dealers. In four branches of one firm, the agency found $96 million of structured-product sales [...]

By |August 26th, 2015|Press Releases & News, SEC|
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FINRA Fines Charles Schwab $2M

FINRA has fined Charles Schwab & Co., Inc. $2 million for net capital deficiencies and for failing to supervise. The net capital deficiencies happened on three different dates in 2014 and spanned from $287 million to $775 million. FINRA's findings indicated that in three instances between May 15, 2014 and July 1, 2014, Schwab was net capital deficient up to $775 million. The deficiencies occurred because on each of those dates, Schwab had cash coming in that exceeded the amounts it could invest with existing facilities. So Schwab gave $1 billion to its parent company for overnight investment. Schwab's Treasury group approved the transfer as an unsecured loan under a revolving loan agreement without consulting its Regulatory Reporting group as to how these transfers would affect the firm's net capital position. Schwab had no procedures implemented mandating its Treasury group to consult with its Regulatory Reporting group about the impact of its actions on net capital. The firm's supervisory systems [...]

By |August 25th, 2015|FINRA, Press Releases & News|
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FINRA Investigates Conflicts In Broker Pay

FINRA is examining potential conflicts in interest regarding how firms compensate their brokers. In a targeted exam letter, FINRA asks firms about a number of compensation policies and practices, ranging from payout grids to recruiting incentives and mutual fund fees. Firms were also asked about compensation they get from product sponsors and how they promote particular products or groups of products. “The intent of this review is to continue our assessment of the efforts employed by firms to identify, mitigate and manage conflicts of interest, specifically with respect to compensation practices,” FINRA explained. FINRA is trying to gather information, rather than looking for violations. The regulator uses these kinds of sweeps to figure out if firms are adequately managing conflicts of interest or if FINRA needs to issue additional guidance. “It is really designed to determine whether practices around compensation or certain products that are sold are being sold for the right reason and there are not compensation incentives that could [...]

By |August 21st, 2015|FINRA, Press Releases & News|
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Hedge Fund Manager Acquitted Of Inside Trading

A federal jury in Atlanta acquitted Steven E. Slawson, a New Jersey hedge fund manager, who had allegedly made illicit profits from sneak previews of financial results of Carter's Inc., an Atlanta-based clothier, before they were released. He was acquitted of thirty-four counts of insider trading. “This case was another example of the government overreaching in insider trading cases," said Slawson's attorney. "My client was at the end of a chain of information, and he had no idea that other people in the beginning of the chain were stealing confidential information. Luckily, the jury understood this and acquitted him of all counts, avoiding a wrongful conviction of an innocent man.” Prosecutors from Atlanta's U.S. Attorney's Office had accused Slawson of using information on Carter's financial results in trades for more than five years. Two ex-Carter's executives were convicted of insider trading and sentenced to terms in federal prison and ordered to pay more than $1.7 million in related cases. If [...]

By |August 20th, 2015|Press Releases & News|
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