The Financial Industry Regulatory Authority (“FINRA”) has fined and sanctioned NYLife Securities, LLC for supervisory failures related to sales of higher-risk mutual funds that were subject to significant volatility.
FINRA found that, from September 2014 to December 2016, NYLife adjusted its customers’ risk tolerances and investment objectives to accommodate sales of higher-risk mutual funds without first seeking its customers’ input. The unapproved adjustments caused an unsuitable overconcentration of high-risk mutual funds in customer accounts, leading to losses totaling $1.4 million.
FINRA’s rules require a brokerage firm to establish, maintain, and enforce written procedures to supervise its associated persons and require member firms to have a reasonable basis for believing every transaction or strategy it recommends is suitable for the customer.
By failing to follow its supervisory procedures and by soliciting unsuitably high-risk transactions, NYLife Securities was deemed in violation of FINRA’s rules. NYLife’s FINRA BrokerCheck Report reveals eleven additional instances of regulatory events involving the firm.
As a result of NYLife’s misconduct, FINRA censured the firm, assessed a fine of $250,000, and ordered NYLife to undo the unsuitable transactions and restore the clients’ money. NYLife must also certify to FINRA that it has reviewed its supervisory system and established and implemented systems that are designed to achieve compliance with FINRA’s rules.