FINRA Fines Three Firms for Inadequate Supervision | Cold Spring Advisory Group

FINRA Fines Three Firms for Inadequate Supervision

March 30, 2015

The Financial Industry Regulatory Authority (FINRA) announced today that it had fined three brokerage firms for failure to adequately supervise the preparation and dissemination of consolidated reports. The three firms, J.P Turner, LaSalle St. Securities, LLC and H. Beck, Inc. were fined after FINRA found that various registered representatives at the firms prepared and distributed the reports to their clients without "adequate review or any prior review by a principal."

H. Beck was fined $425,000 and J.P. Turner was fined $100,000 for not having any written procedures regarding supervision and the use of the reports, and LaSalle St. was fined $175,000 for not properly training its representatives on the use of the reports and failing to enforce the written procedures it did have.

Consolidated reports contain information on most or all of an investor's assets wherever they are held. Unlike monthly statements, consolidated reports are not required by FINRA rules, however, FINRA does require firms that send their clients consolidated reports to have a formal supervisory process to ensure the reports are clear, accurate and not misleading. FINRA's Executive Vice President and Chief of Enforcement Brad Bennett stated, "Inadequate controls around consolidated reporting create the risk that unscrupulous representatives will provide inaccurate and misleading reports to their clients to conceal fraud and theft."

FINRA further requires that firms that are unable to adequately supervise the preparation and use of consolidated reports, must take steps to ensure that their dissemination is prohibited and the firm's registered representatives comply with the prohibition.