BD to Pay $850,000 for Hanging Licenses
A broker-dealer agreed to pay nearly $850,000 to settle charges that it didn’t retain the necessary records to supervise the activities of registered representatives working at a third party firm. The SEC states that the respondent held licenses of 5 registered representatives working at a client firm. The SEC indicates that the individuals used the third party firm’s email system as well as Bloomberg messaging. However, the SEC alleges that the respondent BD failed to preserve the electronic communications as required by the Exchange Act. The SEC also asserts that the respondent BD aided and abetted the third party firm in its failure to register as a broker-dealer by paying 85% of the total commissions back to the firm and the reps.
OUR TAKE: The SEC has indicated that it will scrutinize firms and individuals that need to register as broker-dealers or registered representatives. FINRA has generally owned these types of supervision cases.