The Financial Industry Regulatory Authority (“FINRA”) has barred former First Standard Financial, LLC representative Michael Leahy of Red Bank, New Jersey, based on FINRA’s findings that Leahy was aware of red flags of his subordinate broker’s misconduct, but failed to investigate or take any action to curtail the misconduct.
FINRA found that from September 18, 2018 through October 8, 2019, Leahy’s First Standard subordinate engaged in a pattern of unauthorized trading, unauthorized use of margin, excessive and unsuitable trading, and excessive commission charges.
Leahy was the sole principal at the firm and the only individual responsible for supervising the broker. FINRA found that Leahy was aware of “multiple red flags” of the broker’s misconduct, including daily trade blotters showing frequent in-and-out trading and commissions exceeding 5%, numerous customer complaints of unauthorized trading, unauthorized use of margin, and excessive commissions, and notification from First Standard’s clearing firm of potential unauthorized trading.
FINRA found Leahy failed to investigate the red flags or otherwise take action to curtail the broker’s pattern of misconduct. The broker’s conduct continued unabated until the New Jersey Bureau of Securities revoked the broker’s registration in late 2019.
FINRA deemed Leahy’s conduct in violation of FINRA Rule 3110 which requires that a supervisor take reasonable action to achieve compliance with FINRA rules and federal securities laws and regulations, and reasonably investigate red flags of potential misconduct and take reasonable action when misconduct has occurred.
FINRA likewise found Leahy in violation of FINRA Rule 2010 which requires associated persons to observe high standards of commercial honor and just and equitable principles of trade in the conduct of his or her business.
As a result of FINRA’s findings, FINRA fined Leahy $5,000 and barred him permanently from any association with any FINRA member firm in all principal capacities.