Firms Fined $700,000 for Inadequate Review of Consolidated Statements
FINRA fined three firms a total of $700,000 for failing to supervise and review consolidated reports manually prepared by reps for delivery to clients. According to FINRA, the reps were allowed to “enter customized values for accounts or investments held away from the firm.” In at least one of the cases, FINRA asserts that illiquid securities were not appropriately valued. FINRA reminds firms of Regulatory Notice 10-19 which requires policies and procedures for the review of consolidated statements.
OUR TAKE: Review of consolidated statements is only one element of a firm’s obligation to supervise outside business activities. This type of action is a warning shot to BD firms that allow/require their reps to utilize an independent RIA for fee-based activities.