BD and Founder/President Charged with Supervisory Weaknesses that Allowed Churning
The SEC sanctioned a broker-dealer and its founder/president for failing to implement policies and procedures to prevent churning. According to the SEC, the firm did implement a system that flagged accounts with excessive commissions and high turnover. However, the SEC charges that the firm did not implement policies and procedures that guided supervisors in their review of flagged accounts. The SEC claims that the weak supervisory structure allowed three brokers to churn several accounts. The SEC alleges that the founder/principal had ultimate supervisory responsibility for the policies and procedures even though the firm had over 200 branch offices and over 500 registered representatives. The respondents agreed to pay disgorgement and appoint an independent compliance consultant.