BD Firms Incur $1.1 Million Fine for Not Providing Customer Notifications
FINRA fined two broker-dealers $1.1 Million for failing to provide required customer notifications including notifications about changes in investment objectives, address changes, clearing agreements, and required trade confirm information. FINRA alleges that the failures were the result of computer programming and operational failures that went undetected because of a lack of supervisory controls. Susan Merrill, FINRA’s Enforcement Chief, explained, “These notices are an important form of investor protection — they help protect against changes that are erroneous, unauthorized, or, in the worst case, indicative of an effort to conceal misconduct involving a customer’s account.” The firms must also retain an Independent Consultant to review supervisory systems and processes.
OUR TAKE: Somebody must be responsible for supervising client reporting operations to ensure compliance with applicable law. We often see a breakdown between Operations and Compliance.