Failed Manual Processes Result in $1 Million Fine for Large BD
A large broker-dealer, together with its affiliate clearing firm, were fined $1,025,000 for several technical violations resulting from manual processes. FINRA charges the respondents with failing to (i) send investment objective change letters to customers, (ii) review outside brokerage accounts, (iii) send account opening letters, and (iv) send transaction confirmations. According to FINRA, the firm had relevant policies and procedures in place but failed to enforce those policies as a result of manual processes that allowed for human error.
OUR TAKE: This shows how operational holes can cause compliance violations. The firm had adequate policies but fallible humans that owned key steps in the process failed to fulfill their responsibilities.