BrokerCheck Report TRIAD ADVISORS LLC Section Title Report Summary Firm History CRD# 25803 1 14 Firm Profile 2 - 13 Page(s) Firm Operations 15 - 28 Disclosure Events 29 Please be aware that fraudsters may link to BrokerCheck from phishing and similar scam websites, trying to steal your personal information or your money. Make sure you know who you’re dealing with when investing, and contact FINRA with any concerns. For more information read our investor alert on imposters. i
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BrokerCheck Report
TRIAD ADVISORS LLC
Section Title
Report Summary
Firm History
CRD# 25803
1
14
Firm Profile 2 - 13
Page(s)
Firm Operations 15 - 28
Disclosure Events 29
Please be aware that fraudsters may link to BrokerCheck from phishing and similar scam websites, trying to steal your personal information or your money.Make sure you know who you’re dealing with when investing, and contact FINRA with any concerns.
For more information read our investor alert on imposters.
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5155 PEACHTREE PARKWAYSUITE 3220NORCROSS, GA 30092Regulated by FINRA Atlanta Office
Mailing Address
5155 PEACHTREE PARKWAYSUITE 3220NORCROSS, GA 30092
This firm is a brokerage firm and an investmentadviser firm. For more information aboutinvestment adviser firms, visit the SEC'sInvestment Adviser Public Disclosure website at:
Business Telephone Number
770-840-0363
https://www.adviserinfo.sec.gov
Report Summary for this Firm
This report summary provides an overview of the brokerage firm. Additional information for this firm can be foundin the detailed report.
Disclosure Events
Brokerage firms are required to disclose certaincriminal matters, regulatory actions, civil judicialproceedings and financial matters in which the firm orone of its control affiliates has been involved.
Are there events disclosed about this firm? Yes
The following types of disclosures have beenreported:
Type Count
Regulatory Event 8
Arbitration 5
Firm Profile
This firm is classified as a limited liability company.
This firm was formed in Florida on 12/31/2017.
Its fiscal year ends in December.
Firm History
Information relating to the brokerage firm's historysuch as other business names and successions(e.g., mergers, acquisitions) can be found in thedetailed report.
Firm Operations
Is this brokerage firm currently suspended with anyregulator? No
This firm conducts 15 types of businesses.
This firm is affiliated with financial or investmentinstitutions.
This firm has referral or financial arrangements withother brokers or dealers.
This firm is registered with:
• the SEC• 1 Self-Regulatory Organization• 53 U.S. states and territories
This firm is classified as a limited liability company.
This firm was formed in Florida on 12/31/2017.
CRD#
This section provides the brokerage firm's full legal name, "Doing Business As" name, business and mailingaddresses, telephone number, and any alternate name by which the firm conducts business and where such name isused.
Firm Profile
Firm Names and Locations
Its fiscal year ends in December.
TRIAD ADVISORS LLC
SEC#
25803
8-42007
Main Office Location
Mailing Address
Business Telephone Number
Doing business as TRIAD ADVISORS LLC
770-840-0363
Regulated by FINRA Atlanta Office
5155 PEACHTREE PARKWAYSUITE 3220NORCROSS, GA 30092
5155 PEACHTREE PARKWAYSUITE 3220NORCROSS, GA 30092
This section provides information relating to any successions (e.g., mergers, acquisitions) involving the firm.
12/31/2017Date of Succession:
This firm was previously:
Predecessor SEC#:
TRIAD ADVISORS, INC.
8-42007
25803Predecessor CRD#:
Description TRIAD ADVISORS, INC AMENDED ITS TAX STATUS FROM A CORPORATIONTO A LIMITED LIABILITY COMPANY EFFECTIVE 12/31/2017. ALL ASSETS ANDLIABILITIES WERE ASSUMED BY NEW LIMITED LIABILITY COMPANY. THEREWERE NO CHANGES IN OWNERSHIP AND/OR CONTROL.
12/31/2017Date of Succession:
This firm was previously:
Predecessor SEC#:
TRIAD ADVISORS, INC.
8-42007
25803Predecessor CRD#:
Description TRIAD ADVISORS, INC AMENDED ITS TAX STATUS FROM A CORPORATIONTO A LIMITED LIABILITY COMPANY EFFECTIVE 12/31/2017. ALL ASSETS ANDLIABILITIES WERE ASSUMED BY NEW LIMITED LIABILITY COMPANY
RegistrationsThis section provides information about the regulators (Securities and Exchange Commission (SEC), self-regulatoryorganizations (SROs), and U.S. states and territories) with which the brokerage firm is currently registered andlicensed, the date the license became effective, and certain information about the firm's SEC registration.
This firm is currently registered with the SEC, 1 SRO and 53 U.S. states and territories.
SEC Registration Questions
This firm is registered with the SEC as:
A broker-dealer:
A broker-dealer and government securities broker or dealer:
A government securities broker or dealer only:
This firm has ceased activity as a government securities broker or dealer:
Yes
Yes
No
No
Federal Regulator Status Date Effective
SEC Approved 01/18/1990
Self-Regulatory Organization Status Date Effective
Types of BusinessThis section provides the types of business, including non-securities business, the brokerage firm is engaged in orexpects to be engaged in.
Other Types of Business
This firm does not effect transactions in commodities, commodity futures, or commodity options.This firm does not engage in other non-securities business.
Non-Securities Business Description:
This firm currently conducts 15 types of businesses.
Types of Business
Broker or dealer retailing corporate equity securities over-the-counter
Broker or dealer selling corporate debt securities
Mutual fund retailer
U S. government securities broker
Municipal securities broker
Broker or dealer selling variable life insurance or annuities
Solicitor of time deposits in a financial institution
Broker or dealer selling oil and gas interests
Put and call broker or dealer or option writer
Investment advisory services
Broker or dealer selling tax shelters or limited partnerships in primary distributions
Non-exchange member arranging for transactions in listed securities by exchange member
Private placements of securities
Broker or dealer involved in a networking, kiosk or similar arrangment with a: bank, savings bank or association, orcredit union
Other - TRIAD ADVISORS, LLC. PARTICIPATES IN INSURANCE THROUGH TRIAD INSURANCE AGENCY.
This firm does hold or maintain funds or securities or provide clearing services for other broker-dealer(s).
Introducing Arrangements
This firm does refer or introduce customers to other brokers and dealers.
Name: NATIONAL FINANCIAL SERVICES LLC
Business Address: 260 FRANKLIN STREETSUITE L7BBOSTON, MA 02110
CRD #: 13041
Effective Date: 03/16/1998
Description: THE FIRM WILL OPERATE PURSUANT TO THE (K)(2)(II) EXEMPTIVEPROVISIONS OF SEC RULE 15C3-3 AND WILL NOT HOLD CUSTOMERFUNDS OR SECURITIES. FIRM OPERATES ON A FULLY-DISCLOSED,INTRODUCING BASIS WITH NATIONAL FINANCIAL SERVICES, LLC
Organization AffiliatesThis section provides information on control relationships the firm has with other firms in the securities, investmentadvisory, or banking business.
This firm is, directly or indirectly:
· in control of· controlled by· or under common control withthe following partnerships, corporations, or other organizations engaged in the securities or investmentadvisory business.
Yes
No
No
03/31/2022
434 HARTFORD DRIVENUTLEY, NJ 07110
314622
BLACK DIAMOND FINANCIAL, LLC is under common control with the firm.
THERE ARE RELATED PERSONS OF BLACK DIAMOND FINANCIAL, LLCUNDER COMMON CONTROL WITH THE APPLICANT'S PARENT COMPANY,ADVISOR GROUP, INC.
Description:
Investment AdvisoryActivities:
Securities Activities:
Country:
Foreign Entity:
Effective Date:
Business Address:
CRD #:
No
Yes
No
05/26/2020
522 MADISON AVE11TH FLOORNEW YORK, NY 10024
LADENBURG THALMANN FINANCIAL SERVICED, INC. controls the firm.
LADENBURG THALMANN FINANCIAL SERVICES, INC. INDIRECTLYCONTROLS THE APPLICANT.
ARBOR POINT ADVISORS is under common control with the firm.
ARBOR POINT ADVISORS IS AN AFFILIATED REGISTERED INVESTMENTADVISORY FIRM, WHICH IS INDIRECTLY OWNED BY LADENBURGTHALMANN FINANCIAL SERVICES INC.
Description:
Investment AdvisoryActivities:
Securities Activities:
Country:
Foreign Entity:
Effective Date:
Business Address:
CRD #:
Yes
No
No
11/04/2011
12325 PORT GRACE BLVDLA VISTA, NE 68128
110518
SECURITIES AMERICA ADVISORS, INC. is under common control with the firm.
TRIAD ADVISORS, LLC AND SECURITIES AMERICA ADVISORS, INC. AREBOTH OWNED ENTIRELY BY THE SAME PARENT COMPANY, LADENBURGTHALMANN FINANCIAL SERVICES, INC.
Description:
Investment AdvisoryActivities:
Securities Activities:
Country:
Foreign Entity:
Effective Date:
Business Address:
CRD #:
No
11/04/2011
12325 PORT GRACE BLVDLAVISTA, NE 68128
10205
SECURITIES AMERICA, INC. is under common control with the firm.
TRIAD ADVISORS LLC AND LADENBURG THALMANN & CO. INC ARE BOTHOWNED BY THE SAME PARENT COMPANY, LADENBURG THALMANNFINANCIAL SERVICES, INC.
Description:
Investment AdvisoryActivities:
This firm is not directly or indirectly, controlled by the following:
· bank holding company· national bank· state member bank of the Federal Reserve System· state non-member bank· savings bank or association· credit union· or foreign bank
All firms registered to sell securities or provide investment advice are required to disclose regulatory actions, criminal orcivil judicial proceedings, and certain financial matters in which the firm or one of its control affiliates has been involved.For your convenience, below is a matrix of the number and status of disclosure events involving this brokerage firm orone of its control affiliates. Further information regarding these events can be found in the subsequent pages of thisreport.
What you should know about reported disclosure events:
1. BrokerCheck provides details for any disclosure event that was reported in CRD. It also includessummary information regarding FINRA arbitration awards in cases where the brokerage firm wasnamed as a respondent.
2. Certain thresholds must be met before an event is reported to CRD, for example: o A law enforcement agency must file formal charges before a brokerage firm is required to disclose a
particular criminal event.3. Disclosure events in BrokerCheck reports come from different sources:
o Disclosure events for this brokerage firm were reported by the firm and/or regulators. When the firmand a regulator report information for the same event, both versions of the event will appear in theBrokerCheck report. The different versions will be separated by a solid line with the reporting sourcelabeled.
4. There are different statuses and dispositions for disclosure events: o A disclosure event may have a status of pending, on appeal, or final.
§ A "pending" event involves allegations that have not been proven or formally adjudicated.§ An event that is "on appeal" involves allegations that have been adjudicated but are currently
being appealed.§ A "final" event has been concluded and its resolution is not subject to change.
o A final event generally has a disposition of adjudicated, settled or otherwise resolved.§ An "adjudicated" matter includes a disposition by (1) a court of law in a criminal or civil matter,
or (2) an administrative panel in an action brought by a regulator that is contested by the partycharged with some alleged wrongdoing.
§ A "settled" matter generally involves an agreement by the parties to resolve the matter.Please note that firms may choose to settle customer disputes or regulatory matters forbusiness or other reasons.
§ A "resolved" matter usually involves no payment to the customer and no finding ofwrongdoing on the part of the individual broker. Such matters generally involve customerdisputes.
5. You may wish to contact the brokerage firm to obtain further information regarding any of thedisclosure events contained in this BrokerCheck report.
Regulatory - Final
This type of disclosure event involves (1) a final, formal proceeding initiated by a regulatory authority (e.g., a statesecurities agency, self-regulatory organization, federal regulator such as the U.S. Securities and Exchange Commission,foreign financial regulatory body) for a violation of investment-related rules or regulations; or (2) a revocation orsuspension of the authority of a brokerage firm or its control affiliate to act as an attorney, accountant or federalcontractor.
Disclosure 1 of 8
Reporting Source: Regulator
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOREASONABLY SUPERVISE REPRESENTATIVES' RECOMMENDATIONS OF ANALTERNATIVE MUTUAL FUND. THE FINDINGS STATED THAT THE FIRM DIDNOT HAVE A REASONABLY DESIGNED SUPERVISORY SYSTEM WITHRESPECT TO THE RECOMMENDATION OF ALTERNATIVE MUTUAL FUNDS.THE FIRM HAD NO SYSTEM OR PROCEDURES TO DETERMINE WHETHER ANEW MUTUAL FUND CONSTITUTED A COMPLEX PRODUCT OR WAS ANALTERNATIVE MUTUAL FUND BEFORE FIRM REPRESENTATIVES SOLD IT,SUCH THAT HEIGHTENED DUE DILIGENCE OF THE PRODUCT MAY BEAPPROPRIATE. RATHER, IN REVIEWING AND APPROVING NEW FUNDSBEFORE FIRM REPRESENTATIVES SOLD THEM, THE FIRM SUBJECTEDTHEM TO THE SAME STANDARDS AS TRADITIONAL MUTUAL FUNDS, WHICHDID NOT EVALUATE THE POTENTIAL RISKS AND REWARDS ASSOCIATEDWITH THE STRATEGY OF THE FUNDS. FURTHER, THE FIRM DID NOTCONDUCT ANY DUE DILIGENCE OF MUTUAL FUNDS ADDED TO ITSPLATFORM BY ITS CLEARING FIRM. THE FIRM ALSO DID NOT PROVIDEREASONABLE GUIDANCE OR TRAINING TO REPRESENTATIVESREGARDING THE RISKS AND FEATURES OF ALTERNATIVE MUTUAL FUNDSAND DID NOT HAVE WRITTEN SUPERVISORY PROCEDURES ADVISINGFIRM PRINCIPALS HOW TO SUPERVISE RECOMMENDATIONS OFALTERNATIVE MUTUAL FUNDS. IN ADDITION, THE FIRM UTILIZED ANELECTRONIC TRADE REVIEW SYSTEM TO ASSIST WITH THE SUPERVISIONOF THE TRADING ACTIVITY OF THE FIRM'S FINANCIAL PROFESSIONALS.HOWEVER, THE FIRM FAILED TO CONSIDER WHETHER THE RULES OF THEREVIEW SYSTEM PERTAINING TO TRADITIONAL MUTUAL FUNDS WEREREASONABLE FOR USE IN REVIEWING ALTERNATIVE MUTUAL FUNDS, ORWHETHER IT MAY BE NECESSARY TO TAILOR THE TOOL'S PARAMETERSTO ADDRESS PARTICULAR RISKS AND CHARACTERISTICS OFALTERNATIVE MUTUAL FUNDS. AS A RESULT, THE FIRM'S ALTERNATIVEMUTUAL FUND TRANSACTIONS WERE GENERALLY NOT IDENTIFIED FORADDITIONAL SUITABILITY REVIEW. THE FINDINGS ALSO STATED THAT THEFIRM FAILED TO OBTAIN AND RECORD PRIVATE PLACEMENT CUSTOMERS'ACCOUNT INFORMATION IN THE FIRM'S BOOKS AND RECORDS. THEFIRM'S SUPERVISORY PROCEDURES REQUIRED OFFICE OF SUPERVISORYJURISDICTION (OSJ) BRANCH OFFICES TO SUBMIT COPIES OF NEWACCOUNT FORMS AND SPONSOR SPECIFIC DOCUMENTATION FOR DIRECTFUND AND ALTERNATIVE INVESTMENTS TO THE FIRM'S HOME OFFICE TOENSURE THAT REPRESENTATIVES OPENED A FIRM CLIENT ACCOUNT ANDOBTAINED NEW ACCOUNT FORMS WITH CUSTOMER SUITABILITYINFORMATION FOR ALL DIRECT FUND AND ALTERNATIVE INVESTMENTPURCHASES. THE FIRM ALLOWED ONE OSJ BRANCH TO OFFER THEALTERNATIVE MUTUAL FUND BUT FAILED TO ENFORCE ITS PROCEDURESBY ENSURING THAT THE OSJ BRANCH OFFICE PROVIDED NEW ACCOUNTFORMS AND SPONSOR SPECIFIC DOCUMENTATION TO THE HOME OFFICE.THE FIRM HOME OFFICE DID NOT VERIFY THAT REPRESENTATIVESOBTAINED REQUIRED CUSTOMER INFORMATION PRIOR TO THEIRINVESTMENT IN THE ALTERNATIVE MUTUAL FUND OFFERINGS. THE FIRMHAS SINCE IMPLEMENTED AN ADDITIONAL FEATURE TO ITS SYSTEMSREQUIRING BRANCH OFFICES TO PROVIDE TO THE HOME OFFICE ALLSUCH DOCUMENTATION FOR INVESTMENTS PRIOR TO RECEIVINGCOMMISSION PAYMENTS ON THE INVESTMENTS.
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOREASONABLY SUPERVISE REPRESENTATIVES' RECOMMENDATIONS OF ANALTERNATIVE MUTUAL FUND. THE FINDINGS STATED THAT THE FIRM DIDNOT HAVE A REASONABLY DESIGNED SUPERVISORY SYSTEM WITHRESPECT TO THE RECOMMENDATION OF ALTERNATIVE MUTUAL FUNDS.THE FIRM HAD NO SYSTEM OR PROCEDURES TO DETERMINE WHETHER ANEW MUTUAL FUND CONSTITUTED A COMPLEX PRODUCT OR WAS ANALTERNATIVE MUTUAL FUND BEFORE FIRM REPRESENTATIVES SOLD IT,SUCH THAT HEIGHTENED DUE DILIGENCE OF THE PRODUCT MAY BEAPPROPRIATE. RATHER, IN REVIEWING AND APPROVING NEW FUNDSBEFORE FIRM REPRESENTATIVES SOLD THEM, THE FIRM SUBJECTEDTHEM TO THE SAME STANDARDS AS TRADITIONAL MUTUAL FUNDS, WHICHDID NOT EVALUATE THE POTENTIAL RISKS AND REWARDS ASSOCIATEDWITH THE STRATEGY OF THE FUNDS. FURTHER, THE FIRM DID NOTCONDUCT ANY DUE DILIGENCE OF MUTUAL FUNDS ADDED TO ITSPLATFORM BY ITS CLEARING FIRM. THE FIRM ALSO DID NOT PROVIDEREASONABLE GUIDANCE OR TRAINING TO REPRESENTATIVESREGARDING THE RISKS AND FEATURES OF ALTERNATIVE MUTUAL FUNDSAND DID NOT HAVE WRITTEN SUPERVISORY PROCEDURES ADVISINGFIRM PRINCIPALS HOW TO SUPERVISE RECOMMENDATIONS OFALTERNATIVE MUTUAL FUNDS. IN ADDITION, THE FIRM UTILIZED ANELECTRONIC TRADE REVIEW SYSTEM TO ASSIST WITH THE SUPERVISIONOF THE TRADING ACTIVITY OF THE FIRM'S FINANCIAL PROFESSIONALS.HOWEVER, THE FIRM FAILED TO CONSIDER WHETHER THE RULES OF THEREVIEW SYSTEM PERTAINING TO TRADITIONAL MUTUAL FUNDS WEREREASONABLE FOR USE IN REVIEWING ALTERNATIVE MUTUAL FUNDS, ORWHETHER IT MAY BE NECESSARY TO TAILOR THE TOOL'S PARAMETERSTO ADDRESS PARTICULAR RISKS AND CHARACTERISTICS OFALTERNATIVE MUTUAL FUNDS. AS A RESULT, THE FIRM'S ALTERNATIVEMUTUAL FUND TRANSACTIONS WERE GENERALLY NOT IDENTIFIED FORADDITIONAL SUITABILITY REVIEW. THE FINDINGS ALSO STATED THAT THEFIRM FAILED TO OBTAIN AND RECORD PRIVATE PLACEMENT CUSTOMERS'ACCOUNT INFORMATION IN THE FIRM'S BOOKS AND RECORDS. THEFIRM'S SUPERVISORY PROCEDURES REQUIRED OFFICE OF SUPERVISORYJURISDICTION (OSJ) BRANCH OFFICES TO SUBMIT COPIES OF NEWACCOUNT FORMS AND SPONSOR SPECIFIC DOCUMENTATION FOR DIRECTFUND AND ALTERNATIVE INVESTMENTS TO THE FIRM'S HOME OFFICE TOENSURE THAT REPRESENTATIVES OPENED A FIRM CLIENT ACCOUNT ANDOBTAINED NEW ACCOUNT FORMS WITH CUSTOMER SUITABILITYINFORMATION FOR ALL DIRECT FUND AND ALTERNATIVE INVESTMENTPURCHASES. THE FIRM ALLOWED ONE OSJ BRANCH TO OFFER THEALTERNATIVE MUTUAL FUND BUT FAILED TO ENFORCE ITS PROCEDURESBY ENSURING THAT THE OSJ BRANCH OFFICE PROVIDED NEW ACCOUNTFORMS AND SPONSOR SPECIFIC DOCUMENTATION TO THE HOME OFFICE.THE FIRM HOME OFFICE DID NOT VERIFY THAT REPRESENTATIVESOBTAINED REQUIRED CUSTOMER INFORMATION PRIOR TO THEIRINVESTMENT IN THE ALTERNATIVE MUTUAL FUND OFFERINGS. THE FIRMHAS SINCE IMPLEMENTED AN ADDITIONAL FEATURE TO ITS SYSTEMSREQUIRING BRANCH OFFICES TO PROVIDE TO THE HOME OFFICE ALLSUCH DOCUMENTATION FOR INVESTMENTS PRIOR TO RECEIVINGCOMMISSION PAYMENTS ON THE INVESTMENTS.
WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOREASONABLY SUPERVISE REPRESENTATIVES' RECOMMENDATIONS OF ANALTERNATIVE MUTUAL FUND. THE FINDINGS STATED THAT THE FIRM DIDNOT HAVE A REASONABLY DESIGNED SUPERVISORY SYSTEM WITHRESPECT TO THE RECOMMENDATION OF ALTERNATIVE MUTUAL FUNDS.THE FIRM HAD NO SYSTEM OR PROCEDURES TO DETERMINE WHETHER ANEW MUTUAL FUND CONSTITUTED A COMPLEX PRODUCT OR WAS ANALTERNATIVE MUTUAL FUND BEFORE FIRM REPRESENTATIVES SOLD IT,SUCH THAT HEIGHTENED DUE DILIGENCE OF THE PRODUCT MAY BEAPPROPRIATE. RATHER, IN REVIEWING AND APPROVING NEW FUNDSBEFORE FIRM REPRESENTATIVES SOLD THEM, THE FIRM SUBJECTEDTHEM TO THE SAME STANDARDS AS TRADITIONAL MUTUAL FUNDS, WHICHDID NOT EVALUATE THE POTENTIAL RISKS AND REWARDS ASSOCIATEDWITH THE STRATEGY OF THE FUNDS. FURTHER, THE FIRM DID NOTCONDUCT ANY DUE DILIGENCE OF MUTUAL FUNDS ADDED TO ITSPLATFORM BY ITS CLEARING FIRM. THE FIRM ALSO DID NOT PROVIDEREASONABLE GUIDANCE OR TRAINING TO REPRESENTATIVESREGARDING THE RISKS AND FEATURES OF ALTERNATIVE MUTUAL FUNDSAND DID NOT HAVE WRITTEN SUPERVISORY PROCEDURES ADVISINGFIRM PRINCIPALS HOW TO SUPERVISE RECOMMENDATIONS OFALTERNATIVE MUTUAL FUNDS. IN ADDITION, THE FIRM UTILIZED ANELECTRONIC TRADE REVIEW SYSTEM TO ASSIST WITH THE SUPERVISIONOF THE TRADING ACTIVITY OF THE FIRM'S FINANCIAL PROFESSIONALS.HOWEVER, THE FIRM FAILED TO CONSIDER WHETHER THE RULES OF THEREVIEW SYSTEM PERTAINING TO TRADITIONAL MUTUAL FUNDS WEREREASONABLE FOR USE IN REVIEWING ALTERNATIVE MUTUAL FUNDS, ORWHETHER IT MAY BE NECESSARY TO TAILOR THE TOOL'S PARAMETERSTO ADDRESS PARTICULAR RISKS AND CHARACTERISTICS OFALTERNATIVE MUTUAL FUNDS. AS A RESULT, THE FIRM'S ALTERNATIVEMUTUAL FUND TRANSACTIONS WERE GENERALLY NOT IDENTIFIED FORADDITIONAL SUITABILITY REVIEW. THE FINDINGS ALSO STATED THAT THEFIRM FAILED TO OBTAIN AND RECORD PRIVATE PLACEMENT CUSTOMERS'ACCOUNT INFORMATION IN THE FIRM'S BOOKS AND RECORDS. THEFIRM'S SUPERVISORY PROCEDURES REQUIRED OFFICE OF SUPERVISORYJURISDICTION (OSJ) BRANCH OFFICES TO SUBMIT COPIES OF NEWACCOUNT FORMS AND SPONSOR SPECIFIC DOCUMENTATION FOR DIRECTFUND AND ALTERNATIVE INVESTMENTS TO THE FIRM'S HOME OFFICE TOENSURE THAT REPRESENTATIVES OPENED A FIRM CLIENT ACCOUNT ANDOBTAINED NEW ACCOUNT FORMS WITH CUSTOMER SUITABILITYINFORMATION FOR ALL DIRECT FUND AND ALTERNATIVE INVESTMENTPURCHASES. THE FIRM ALLOWED ONE OSJ BRANCH TO OFFER THEALTERNATIVE MUTUAL FUND BUT FAILED TO ENFORCE ITS PROCEDURESBY ENSURING THAT THE OSJ BRANCH OFFICE PROVIDED NEW ACCOUNTFORMS AND SPONSOR SPECIFIC DOCUMENTATION TO THE HOME OFFICE.THE FIRM HOME OFFICE DID NOT VERIFY THAT REPRESENTATIVESOBTAINED REQUIRED CUSTOMER INFORMATION PRIOR TO THEIRINVESTMENT IN THE ALTERNATIVE MUTUAL FUND OFFERINGS. THE FIRMHAS SINCE IMPLEMENTED AN ADDITIONAL FEATURE TO ITS SYSTEMSREQUIRING BRANCH OFFICES TO PROVIDE TO THE HOME OFFICE ALLSUCH DOCUMENTATION FOR INVESTMENTS PRIOR TO RECEIVINGCOMMISSION PAYMENTS ON THE INVESTMENTS.
Resolution Date: 12/29/2021
Resolution:
Other Sanctions Ordered: PREJUDGMENT INTEREST ON RESTITUTION; UNDERTAKING
Sanction Details: THE FIRM WAS CENSURED, FINED $195,000, ORDERED TO PAY $510,256.57,PLUS INTEREST, IN RESTITUTION TO CUSTOMERS, AND REQUIRED TOCERTIFY THAT THE FIRM HAS ESTABLISHED AND IMPLEMENTED POLICIES,PROCEDURES, AND INTERNAL CONTROLS REASONABLY DESIGNED TOADDRESS AND REMEDIATE THE ISSUES IDENTIFIED IN THIS AWC. FINEPAID IN FULL ON JANUARY 11, 2022.
Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOREASONABLY SUPERVISE REPRESENTATIVES' RECOMMENDATIONS OF ANALTERNATIVE MUTUAL FUND. THE FINDINGS STATED THAT THE FIRM DIDNOT HAVE A REASONABLY DESIGNED SUPERVISORY SYSTEM WITHRESPECT TO THE RECOMMENDATION OF ALTERNATIVE MUTUAL FUNDS.THE FIRM HAD NO SYSTEM OR PROCEDURES TO DETERMINE WHETHER ANEW MUTUAL FUND CONSTITUTED A COMPLEX PRODUCT OR WAS ANALTERNATIVE MUTUAL FUND BEFORE FIRM REPRESENTATIVES SOLD IT,SUCH THAT HEIGHTENED DUE DILIGENCE OF THE PRODUCT MAY BEAPPROPRIATE. RATHER, IN REVIEWING AND APPROVING NEW FUNDSBEFORE FIRM REPRESENTATIVES SOLD THEM, THE FIRM SUBJECTEDTHEM TO THE SAME STANDARDS AS TRADITIONAL MUTUAL FUNDS, WHICHDID NOT EVALUATE THE POTENTIAL RISKS AND REWARDS ASSOCIATEDWITH THE STRATEGY OF THE FUNDS. FURTHER, THE FIRM DID NOTCONDUCT ANY DUE DILIGENCE OF MUTUAL FUNDS ADDED TO ITSPLATFORM BY ITS CLEARING FIRM. THE FIRM ALSO DID NOT PROVIDEREASONABLE GUIDANCE OR TRAINING TO REPRESENTATIVESREGARDING THE RISKS AND FEATURES OF ALTERNATIVE MUTUAL FUNDSAND DID NOT HAVE WRITTEN SUPERVISORY PROCEDURES ADVISINGFIRM PRINCIPALS HOW TO SUPERVISE RECOMMENDATIONS OFALTERNATIVE MUTUAL FUNDS. IN ADDITION, THE FIRM UTILIZED ANELECTRONIC TRADE REVIEW SYSTEM TO ASSIST WITH THE SUPERVISIONOF THE TRADING ACTIVITY OF THE FIRM'S FINANCIAL PROFESSIONALS.HOWEVER, THE FIRM FAILED TO CONSIDER WHETHER THE RULES OF THEREVIEW SYSTEM PERTAINING TO TRADITIONAL MUTUAL FUNDS WEREREASONABLE FOR USE IN REVIEWING ALTERNATIVE MUTUAL FUNDS, ORWHETHER IT MAY BE NECESSARY TO TAILOR THE TOOL'S PARAMETERSTO ADDRESS PARTICULAR RISKS AND CHARACTERISTICS OFALTERNATIVE MUTUAL FUNDS. AS A RESULT, THE FIRM'S ALTERNATIVEMUTUAL FUND TRANSACTIONS WERE GENERALLY NOT IDENTIFIED FORADDITIONAL SUITABILITY REVIEW. THE FINDINGS ALSO STATED THAT THEFIRM FAILED TO OBTAIN AND RECORD PRIVATE PLACEMENT CUSTOMERS'ACCOUNT INFORMATION IN THE FIRM'S BOOKS AND RECORDS. THEFIRM'S SUPERVISORY PROCEDURES REQUIRED OFFICE OF SUPERVISORYJURISDICTION (OSJ) BRANCH OFFICES TO SUBMIT COPIES OF NEWACCOUNT FORMS AND SPONSOR SPECIFIC DOCUMENTATION FOR DIRECTFUND AND ALTERNATIVE INVESTMENTS TO THE FIRM'S HOME OFFICE TOENSURE THAT REPRESENTATIVES OPENED A FIRM CLIENT ACCOUNT ANDOBTAINED NEW ACCOUNT FORMS WITH CUSTOMER SUITABILITYINFORMATION FOR ALL DIRECT FUND AND ALTERNATIVE INVESTMENTPURCHASES. THE FIRM ALLOWED ONE OSJ BRANCH TO OFFER THEALTERNATIVE MUTUAL FUND BUT FAILED TO ENFORCE ITS PROCEDURESBY ENSURING THAT THE OSJ BRANCH OFFICE PROVIDED NEW ACCOUNTFORMS AND SPONSOR SPECIFIC DOCUMENTATION TO THE HOME OFFICE.THE FIRM HOME OFFICE DID NOT VERIFY THAT REPRESENTATIVESOBTAINED REQUIRED CUSTOMER INFORMATION PRIOR TO THEIRINVESTMENT IN THE ALTERNATIVE MUTUAL FUND OFFERINGS. THE FIRMHAS SINCE IMPLEMENTED AN ADDITIONAL FEATURE TO ITS SYSTEMSREQUIRING BRANCH OFFICES TO PROVIDE TO THE HOME OFFICE ALLSUCH DOCUMENTATION FOR INVESTMENTS PRIOR TO RECEIVINGCOMMISSION PAYMENTS ON THE INVESTMENTS.
WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOREASONABLY SUPERVISE REPRESENTATIVES' RECOMMENDATIONS OF ANALTERNATIVE MUTUAL FUND. THE FINDINGS STATED THAT THE FIRM DIDNOT HAVE A REASONABLY DESIGNED SUPERVISORY SYSTEM WITHRESPECT TO THE RECOMMENDATION OF ALTERNATIVE MUTUAL FUNDS.THE FIRM HAD NO SYSTEM OR PROCEDURES TO DETERMINE WHETHER ANEW MUTUAL FUND CONSTITUTED A COMPLEX PRODUCT OR WAS ANALTERNATIVE MUTUAL FUND BEFORE FIRM REPRESENTATIVES SOLD IT,SUCH THAT HEIGHTENED DUE DILIGENCE OF THE PRODUCT MAY BEAPPROPRIATE. RATHER, IN REVIEWING AND APPROVING NEW FUNDSBEFORE FIRM REPRESENTATIVES SOLD THEM, THE FIRM SUBJECTEDTHEM TO THE SAME STANDARDS AS TRADITIONAL MUTUAL FUNDS, WHICHDID NOT EVALUATE THE POTENTIAL RISKS AND REWARDS ASSOCIATEDWITH THE STRATEGY OF THE FUNDS. FURTHER, THE FIRM DID NOTCONDUCT ANY DUE DILIGENCE OF MUTUAL FUNDS ADDED TO ITSPLATFORM BY ITS CLEARING FIRM. THE FIRM ALSO DID NOT PROVIDEREASONABLE GUIDANCE OR TRAINING TO REPRESENTATIVESREGARDING THE RISKS AND FEATURES OF ALTERNATIVE MUTUAL FUNDSAND DID NOT HAVE WRITTEN SUPERVISORY PROCEDURES ADVISINGFIRM PRINCIPALS HOW TO SUPERVISE RECOMMENDATIONS OFALTERNATIVE MUTUAL FUNDS. IN ADDITION, THE FIRM UTILIZED ANELECTRONIC TRADE REVIEW SYSTEM TO ASSIST WITH THE SUPERVISIONOF THE TRADING ACTIVITY OF THE FIRM'S FINANCIAL PROFESSIONALS.HOWEVER, THE FIRM FAILED TO CONSIDER WHETHER THE RULES OF THEREVIEW SYSTEM PERTAINING TO TRADITIONAL MUTUAL FUNDS WEREREASONABLE FOR USE IN REVIEWING ALTERNATIVE MUTUAL FUNDS, ORWHETHER IT MAY BE NECESSARY TO TAILOR THE TOOL'S PARAMETERSTO ADDRESS PARTICULAR RISKS AND CHARACTERISTICS OFALTERNATIVE MUTUAL FUNDS. AS A RESULT, THE FIRM'S ALTERNATIVEMUTUAL FUND TRANSACTIONS WERE GENERALLY NOT IDENTIFIED FORADDITIONAL SUITABILITY REVIEW. THE FINDINGS ALSO STATED THAT THEFIRM FAILED TO OBTAIN AND RECORD PRIVATE PLACEMENT CUSTOMERS'ACCOUNT INFORMATION IN THE FIRM'S BOOKS AND RECORDS. THEFIRM'S SUPERVISORY PROCEDURES REQUIRED OFFICE OF SUPERVISORYJURISDICTION (OSJ) BRANCH OFFICES TO SUBMIT COPIES OF NEWACCOUNT FORMS AND SPONSOR SPECIFIC DOCUMENTATION FOR DIRECTFUND AND ALTERNATIVE INVESTMENTS TO THE FIRM'S HOME OFFICE TOENSURE THAT REPRESENTATIVES OPENED A FIRM CLIENT ACCOUNT ANDOBTAINED NEW ACCOUNT FORMS WITH CUSTOMER SUITABILITYINFORMATION FOR ALL DIRECT FUND AND ALTERNATIVE INVESTMENTPURCHASES. THE FIRM ALLOWED ONE OSJ BRANCH TO OFFER THEALTERNATIVE MUTUAL FUND BUT FAILED TO ENFORCE ITS PROCEDURESBY ENSURING THAT THE OSJ BRANCH OFFICE PROVIDED NEW ACCOUNTFORMS AND SPONSOR SPECIFIC DOCUMENTATION TO THE HOME OFFICE.THE FIRM HOME OFFICE DID NOT VERIFY THAT REPRESENTATIVESOBTAINED REQUIRED CUSTOMER INFORMATION PRIOR TO THEIRINVESTMENT IN THE ALTERNATIVE MUTUAL FUND OFFERINGS. THE FIRMHAS SINCE IMPLEMENTED AN ADDITIONAL FEATURE TO ITS SYSTEMSREQUIRING BRANCH OFFICES TO PROVIDE TO THE HOME OFFICE ALLSUCH DOCUMENTATION FOR INVESTMENTS PRIOR TO RECEIVINGCOMMISSION PAYMENTS ON THE INVESTMENTS.
Resolution Date: 12/29/2021
Resolution:
Other Sanctions Ordered: PREJUDGMENT INTEREST ON RESTITUTION; UNDERTAKING
Sanction Details: THE FIRM WAS CENSURED, FINED $195,000, ORDERED TO PAY $510,256.57,PLUS INTEREST, IN RESTITUTION TO CUSTOMERS, AND REQUIRED TOCERTIFY THAT THE FIRM HAS ESTABLISHED AND IMPLEMENTED POLICIES,PROCEDURES, AND INTERNAL CONTROLS REASONABLY DESIGNED TOADDRESS AND REMEDIATE THE ISSUES IDENTIFIED IN THIS AWC.
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOESTABLISH AND MAINTAIN A REASONABLE SUPERVISORY SYSTEM TOACHIEVE COMPLIANCE WITH SUITABILITY REQUIREMENTS REGARDINGSWITCHING AND SHORT-TERM TRADING OF CLASS A SHARE MUTUALFUNDS AND FAILED TO SUPERVISE SUCH TRADING. THE FINDINGS STATEDTHAT THE FIRM RELIED ON ITS AUTOMATED SURVEILLANCE SYSTEM TOIDENTIFY MUTUAL FUND SWITCHES AND ON DESIGNATED PRINCIPALS TOOBTAIN AND REVIEW A SIGNED SWITCH LETTER FROM THE CUSTOMERDETAILING THE RATIONALE FOR THE SWITCH. THE SYSTEM, HOWEVER,ALLOWED DESIGNATED PRINCIPALS TO APPROVE A TRANSACTIONBEFORE THE FIRM RECEIVED THE SWITCH LETTER. IN MANY CASES, THEFIRM DID ON RECEIVE SWITCH LETTERS UNTIL MONTHS AFTER THETRANSACTION OCCURRED, AND IN SOME INSTANCES, THE FIRM NEVERRECEIVED A SWITCH LETTER. THE WSPS ALSO REQUIRED EVIDENCE OFSUPERVISORY REVIEW BY THE DESIGNATED PRINCIPAL INITIALING THETICKET/APPLICATION AND THE PURCHASE OR SALES BLOTTER. IN MANYINSTANCES, THE FIRM'S DESIGNATED PRINCIPALS FAILED TO REVIEW THETRANSACTIONS PRIOR TO EXECUTION. AS A RESULT, A REGISTEREDREPRESENTATIVE ASSOCIATED WITH THE FIRM ENGAGED IN SHORT-TERM, UNSUITABLE PURCHASES AND SALES AND SWITCHING OF MUTUALFUNDS IN CUSTOMER ACCOUNTS RESULTING IN LOSSES OF $43,998.48.THE FINDINGS ALSO STATED THAT THE FIRM FAILED TO ESTABLISH,MAINTAIN, AND ENFORCE REASONABLE SUPERVISORY SYSTEM ANDWSPS THAT WERE REASONABLY DESIGNED TO IDENTIFY POSSIBLEINAPPROPRIATE RATES OF VARIABLE ANNUITY (VA) EXCHANGES.SPECIFICALLY, THE FIRM'S WSPS FAILED TO SET FORTH ANYPROCEDURES FOR REVIEW OF OR CALCULATION OF RATES OF VAEXCHANGES. INSTEAD, THE FIRM RELIED ON TWO DESIGNATEDPRINCIPALS TO IDENTIFY PROBLEMATIC RATES OF EXCHANGE WITHOUTANY EXCEPTION REPORTS OR OTHER TOOLS. THE ONLY TOOL THEPRINCIPALS HAD ACCESS TO, THE FIRM'S VA BLOTTER, FAILED TODISTINGUISH BETWEEN VA EXCHANGES AND REPLACEMENTS. THE FIRMSOLD $743 MILLION IN VAS WHICH ACCOUNTED FOR OVER 15 PERCENTOF ITS OVERALL SALES. THE FIRM HAD 21,927 VA EXCHANGES, WHICHACCOUNTED FOR $199.4 MILLION OF THE $743 MILLION. BECAUSE THEFIRM'S BLOTTER DID NOT DISTINGUISH BETWEEN EXCHANGES ANDREPLACEMENTS FROM OTHER VA TRANSACTIONS, THE FIRM WASUNABLE TO MONITOR AND REASONABLY SUPERVISE TO DETERMINEWHETHER THERE WERE ANY POTENTIALLY INAPPROPRIATE RATES OFEXCHANGE. GIVEN THE LARGE VOLUME OF VA TRANSACTIONS, IT WASUNREASONABLE TO EXPECT THAT THE TWO DESIGNATED PRINCIPALSCOULD REASONABLY SURVEIL ALL THE VA APPLICATIONS FOR TRENDSAND RATES OF EXCHANGE AMONG ITS REGISTERED REPRESENTATIVESWITHOUT ACCESS TO ACCURATE HISTORICAL DATA, SYSTEMATICSURVEILLANCE TOOLS, OR GUIDANCE FROM THE FIRM. AS A RESULT, THEFIRM FAILED TO IDENTIFY PATTERNS OR TRENDS IN VA EXCHANGETRANSACTIONS BY ITS REGISTERED REPRESENTATIVES. THE FINDINGSALSO INCLUDED THAT THE FIRM FAILED TO TIMELY FILE DISCLOSURES INCONNECTION WITH CUSTOMER-RELATED ARBITRATIONS THAT RESULTEDIN SETTLEMENTS GREATER THAN $25,000, FAILED TO TIMELY REPORTWRITTEN CUSTOMER COMPLAINTS, FAILED TO TIMELY UPDATE ITSREGISTERED REPRESENTATIVES' FORM U4 TO DISCLOSE REPORTABLEEVENTS RELATED TO ARBITRATION FILINGS AND SETTLEMENTS, ANDFAILED TO TIMELY UPDATE FORMER REGISTERED REPRESENTATIVES'FORM U5 TO DISCLOSE REPORTABLE EVENTS INVOLVING ARBITRATIONCLAIMS AND SETTLEMENTS.
WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOESTABLISH AND MAINTAIN A REASONABLE SUPERVISORY SYSTEM TOACHIEVE COMPLIANCE WITH SUITABILITY REQUIREMENTS REGARDINGSWITCHING AND SHORT-TERM TRADING OF CLASS A SHARE MUTUALFUNDS AND FAILED TO SUPERVISE SUCH TRADING. THE FINDINGS STATEDTHAT THE FIRM RELIED ON ITS AUTOMATED SURVEILLANCE SYSTEM TOIDENTIFY MUTUAL FUND SWITCHES AND ON DESIGNATED PRINCIPALS TOOBTAIN AND REVIEW A SIGNED SWITCH LETTER FROM THE CUSTOMERDETAILING THE RATIONALE FOR THE SWITCH. THE SYSTEM, HOWEVER,ALLOWED DESIGNATED PRINCIPALS TO APPROVE A TRANSACTIONBEFORE THE FIRM RECEIVED THE SWITCH LETTER. IN MANY CASES, THEFIRM DID ON RECEIVE SWITCH LETTERS UNTIL MONTHS AFTER THETRANSACTION OCCURRED, AND IN SOME INSTANCES, THE FIRM NEVERRECEIVED A SWITCH LETTER. THE WSPS ALSO REQUIRED EVIDENCE OFSUPERVISORY REVIEW BY THE DESIGNATED PRINCIPAL INITIALING THETICKET/APPLICATION AND THE PURCHASE OR SALES BLOTTER. IN MANYINSTANCES, THE FIRM'S DESIGNATED PRINCIPALS FAILED TO REVIEW THETRANSACTIONS PRIOR TO EXECUTION. AS A RESULT, A REGISTEREDREPRESENTATIVE ASSOCIATED WITH THE FIRM ENGAGED IN SHORT-TERM, UNSUITABLE PURCHASES AND SALES AND SWITCHING OF MUTUALFUNDS IN CUSTOMER ACCOUNTS RESULTING IN LOSSES OF $43,998.48.THE FINDINGS ALSO STATED THAT THE FIRM FAILED TO ESTABLISH,MAINTAIN, AND ENFORCE REASONABLE SUPERVISORY SYSTEM ANDWSPS THAT WERE REASONABLY DESIGNED TO IDENTIFY POSSIBLEINAPPROPRIATE RATES OF VARIABLE ANNUITY (VA) EXCHANGES.SPECIFICALLY, THE FIRM'S WSPS FAILED TO SET FORTH ANYPROCEDURES FOR REVIEW OF OR CALCULATION OF RATES OF VAEXCHANGES. INSTEAD, THE FIRM RELIED ON TWO DESIGNATEDPRINCIPALS TO IDENTIFY PROBLEMATIC RATES OF EXCHANGE WITHOUTANY EXCEPTION REPORTS OR OTHER TOOLS. THE ONLY TOOL THEPRINCIPALS HAD ACCESS TO, THE FIRM'S VA BLOTTER, FAILED TODISTINGUISH BETWEEN VA EXCHANGES AND REPLACEMENTS. THE FIRMSOLD $743 MILLION IN VAS WHICH ACCOUNTED FOR OVER 15 PERCENTOF ITS OVERALL SALES. THE FIRM HAD 21,927 VA EXCHANGES, WHICHACCOUNTED FOR $199.4 MILLION OF THE $743 MILLION. BECAUSE THEFIRM'S BLOTTER DID NOT DISTINGUISH BETWEEN EXCHANGES ANDREPLACEMENTS FROM OTHER VA TRANSACTIONS, THE FIRM WASUNABLE TO MONITOR AND REASONABLY SUPERVISE TO DETERMINEWHETHER THERE WERE ANY POTENTIALLY INAPPROPRIATE RATES OFEXCHANGE. GIVEN THE LARGE VOLUME OF VA TRANSACTIONS, IT WASUNREASONABLE TO EXPECT THAT THE TWO DESIGNATED PRINCIPALSCOULD REASONABLY SURVEIL ALL THE VA APPLICATIONS FOR TRENDSAND RATES OF EXCHANGE AMONG ITS REGISTERED REPRESENTATIVESWITHOUT ACCESS TO ACCURATE HISTORICAL DATA, SYSTEMATICSURVEILLANCE TOOLS, OR GUIDANCE FROM THE FIRM. AS A RESULT, THEFIRM FAILED TO IDENTIFY PATTERNS OR TRENDS IN VA EXCHANGETRANSACTIONS BY ITS REGISTERED REPRESENTATIVES. THE FINDINGSALSO INCLUDED THAT THE FIRM FAILED TO TIMELY FILE DISCLOSURES INCONNECTION WITH CUSTOMER-RELATED ARBITRATIONS THAT RESULTEDIN SETTLEMENTS GREATER THAN $25,000, FAILED TO TIMELY REPORTWRITTEN CUSTOMER COMPLAINTS, FAILED TO TIMELY UPDATE ITSREGISTERED REPRESENTATIVES' FORM U4 TO DISCLOSE REPORTABLEEVENTS RELATED TO ARBITRATION FILINGS AND SETTLEMENTS, ANDFAILED TO TIMELY UPDATE FORMER REGISTERED REPRESENTATIVES'FORM U5 TO DISCLOSE REPORTABLE EVENTS INVOLVING ARBITRATIONCLAIMS AND SETTLEMENTS.
WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOESTABLISH AND MAINTAIN A REASONABLE SUPERVISORY SYSTEM TOACHIEVE COMPLIANCE WITH SUITABILITY REQUIREMENTS REGARDINGSWITCHING AND SHORT-TERM TRADING OF CLASS A SHARE MUTUALFUNDS AND FAILED TO SUPERVISE SUCH TRADING. THE FINDINGS STATEDTHAT THE FIRM RELIED ON ITS AUTOMATED SURVEILLANCE SYSTEM TOIDENTIFY MUTUAL FUND SWITCHES AND ON DESIGNATED PRINCIPALS TOOBTAIN AND REVIEW A SIGNED SWITCH LETTER FROM THE CUSTOMERDETAILING THE RATIONALE FOR THE SWITCH. THE SYSTEM, HOWEVER,ALLOWED DESIGNATED PRINCIPALS TO APPROVE A TRANSACTIONBEFORE THE FIRM RECEIVED THE SWITCH LETTER. IN MANY CASES, THEFIRM DID ON RECEIVE SWITCH LETTERS UNTIL MONTHS AFTER THETRANSACTION OCCURRED, AND IN SOME INSTANCES, THE FIRM NEVERRECEIVED A SWITCH LETTER. THE WSPS ALSO REQUIRED EVIDENCE OFSUPERVISORY REVIEW BY THE DESIGNATED PRINCIPAL INITIALING THETICKET/APPLICATION AND THE PURCHASE OR SALES BLOTTER. IN MANYINSTANCES, THE FIRM'S DESIGNATED PRINCIPALS FAILED TO REVIEW THETRANSACTIONS PRIOR TO EXECUTION. AS A RESULT, A REGISTEREDREPRESENTATIVE ASSOCIATED WITH THE FIRM ENGAGED IN SHORT-TERM, UNSUITABLE PURCHASES AND SALES AND SWITCHING OF MUTUALFUNDS IN CUSTOMER ACCOUNTS RESULTING IN LOSSES OF $43,998.48.THE FINDINGS ALSO STATED THAT THE FIRM FAILED TO ESTABLISH,MAINTAIN, AND ENFORCE REASONABLE SUPERVISORY SYSTEM ANDWSPS THAT WERE REASONABLY DESIGNED TO IDENTIFY POSSIBLEINAPPROPRIATE RATES OF VARIABLE ANNUITY (VA) EXCHANGES.SPECIFICALLY, THE FIRM'S WSPS FAILED TO SET FORTH ANYPROCEDURES FOR REVIEW OF OR CALCULATION OF RATES OF VAEXCHANGES. INSTEAD, THE FIRM RELIED ON TWO DESIGNATEDPRINCIPALS TO IDENTIFY PROBLEMATIC RATES OF EXCHANGE WITHOUTANY EXCEPTION REPORTS OR OTHER TOOLS. THE ONLY TOOL THEPRINCIPALS HAD ACCESS TO, THE FIRM'S VA BLOTTER, FAILED TODISTINGUISH BETWEEN VA EXCHANGES AND REPLACEMENTS. THE FIRMSOLD $743 MILLION IN VAS WHICH ACCOUNTED FOR OVER 15 PERCENTOF ITS OVERALL SALES. THE FIRM HAD 21,927 VA EXCHANGES, WHICHACCOUNTED FOR $199.4 MILLION OF THE $743 MILLION. BECAUSE THEFIRM'S BLOTTER DID NOT DISTINGUISH BETWEEN EXCHANGES ANDREPLACEMENTS FROM OTHER VA TRANSACTIONS, THE FIRM WASUNABLE TO MONITOR AND REASONABLY SUPERVISE TO DETERMINEWHETHER THERE WERE ANY POTENTIALLY INAPPROPRIATE RATES OFEXCHANGE. GIVEN THE LARGE VOLUME OF VA TRANSACTIONS, IT WASUNREASONABLE TO EXPECT THAT THE TWO DESIGNATED PRINCIPALSCOULD REASONABLY SURVEIL ALL THE VA APPLICATIONS FOR TRENDSAND RATES OF EXCHANGE AMONG ITS REGISTERED REPRESENTATIVESWITHOUT ACCESS TO ACCURATE HISTORICAL DATA, SYSTEMATICSURVEILLANCE TOOLS, OR GUIDANCE FROM THE FIRM. AS A RESULT, THEFIRM FAILED TO IDENTIFY PATTERNS OR TRENDS IN VA EXCHANGETRANSACTIONS BY ITS REGISTERED REPRESENTATIVES. THE FINDINGSALSO INCLUDED THAT THE FIRM FAILED TO TIMELY FILE DISCLOSURES INCONNECTION WITH CUSTOMER-RELATED ARBITRATIONS THAT RESULTEDIN SETTLEMENTS GREATER THAN $25,000, FAILED TO TIMELY REPORTWRITTEN CUSTOMER COMPLAINTS, FAILED TO TIMELY UPDATE ITSREGISTERED REPRESENTATIVES' FORM U4 TO DISCLOSE REPORTABLEEVENTS RELATED TO ARBITRATION FILINGS AND SETTLEMENTS, ANDFAILED TO TIMELY UPDATE FORMER REGISTERED REPRESENTATIVES'FORM U5 TO DISCLOSE REPORTABLE EVENTS INVOLVING ARBITRATIONCLAIMS AND SETTLEMENTS.
Resolution Date: 02/09/2021
Resolution:
Other Sanctions Ordered:
Sanction Details: THE FIRM WAS CENSURED, FINED $150,000, AND SHALL PAY RESTITUTIONOF $43,998.48 PLUS INTEREST. FINE PAID IN FULL ON FEBRUARY 24, 2021.
Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?
Allegations: FINRA ALLEGED THAT DURING THE PERIOD FROM JUNE 2015 THROUGHDECEMBER 2017, THE FIR FAILED TO ESTABLISH AND MAINTAIN AREASONABLE SUPERVISORY SYSTEM RELATED TO MONITORINGVARIABLE ANNUITY EXCHANGES; MONITORING SHORT-TERM ANDSUITABLE MUTUAL FUND SWITCHES; AND FAILURE TO MAKE TIMELYSTATISTICAL DISCLOSURE FILINGS.
Initiated By: FINANCIAL INDUSTRY REGULATORY AUTHORITY
Principal Sanction(s)/ReliefSought:
Censure
Other Sanction(s)/ReliefSought:
FINE AND RESTITUTION
Date Initiated: 02/09/2021
Docket/Case Number: 2017052330501
Principal Product Type: Annuity(ies) - Variable
Other Product Type(s): MUTUAL FUNDS
Allegations: FINRA ALLEGED THAT DURING THE PERIOD FROM JUNE 2015 THROUGHDECEMBER 2017, THE FIR FAILED TO ESTABLISH AND MAINTAIN AREASONABLE SUPERVISORY SYSTEM RELATED TO MONITORINGVARIABLE ANNUITY EXCHANGES; MONITORING SHORT-TERM ANDSUITABLE MUTUAL FUND SWITCHES; AND FAILURE TO MAKE TIMELYSTATISTICAL DISCLOSURE FILINGS.
Resolution Date: 02/09/2021
Resolution:
Other Sanctions Ordered:
Sanction Details: THE FIRM CONSENTED TO A CENSURE; FINE OF $150,000; RESTITUTIONOF $43,998.48 PLUS INTEREST.
Firm Statement WITHOUT ADMITTING OR DENYING THE FINDING, THE FIRM CONSENTEDTO THE DESCRIBED SANCTIONS AND ENTRY OF FINDINGS. THEREFORE,THE FIRM IS CENSURED, FINED $150,000 AND WILL PAY RESTITUTION OF$43,998.48, PLUS INTEREST.
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOIDENTIFY AND APPLY SALES CHARGE DISCOUNTS TO CERTAINCUSTOMERS' ELIGIBLE PURCHASES OF UNIT INVESTMENT TRUSTS (UITS)THAT RESULTED IN CUSTOMERS PAYING EXCESSIVE SALES CHARGES OFAPPROXIMATELY $102,631.62. THE FINDINGS STATED THAT THE FIRMFAILED TO ESTABLISH, MAINTAIN AND ENFORCE A SUPERVISORY SYSTEMAND ADEQUATE WSPS REASONABLY DESIGNED TO ENSURE CUSTOMERSRECEIVED SALES CHARGE DISCOUNTS ON ALL ELIGIBLE UIT PURCHASES.THE FIRM HAD NO SUPERVISORY SYSTEM DESIGNED TO IDENTIFY ANDAPPLY SALES CHARGE DISCOUNTS. THE FIRM IMPLEMENTED AN ALERTSYSTEM TO IDENTIFY UIT BREAKPOINT DISCOUNTS, BUT THE ALERTSYSTEM DID NOT APPLY TO ROLLOVERS AND EXCHANGES, WHICHACCOUNTED FOR MORE THAN 85 PERCENT OF ITS MISSED DISCOUNTS.
WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOIDENTIFY AND APPLY SALES CHARGE DISCOUNTS TO CERTAINCUSTOMERS' ELIGIBLE PURCHASES OF UNIT INVESTMENT TRUSTS (UITS)THAT RESULTED IN CUSTOMERS PAYING EXCESSIVE SALES CHARGES OFAPPROXIMATELY $102,631.62. THE FINDINGS STATED THAT THE FIRMFAILED TO ESTABLISH, MAINTAIN AND ENFORCE A SUPERVISORY SYSTEMAND ADEQUATE WSPS REASONABLY DESIGNED TO ENSURE CUSTOMERSRECEIVED SALES CHARGE DISCOUNTS ON ALL ELIGIBLE UIT PURCHASES.THE FIRM HAD NO SUPERVISORY SYSTEM DESIGNED TO IDENTIFY ANDAPPLY SALES CHARGE DISCOUNTS. THE FIRM IMPLEMENTED AN ALERTSYSTEM TO IDENTIFY UIT BREAKPOINT DISCOUNTS, BUT THE ALERTSYSTEM DID NOT APPLY TO ROLLOVERS AND EXCHANGES, WHICHACCOUNTED FOR MORE THAN 85 PERCENT OF ITS MISSED DISCOUNTS.
Resolution Date: 03/16/2016
Resolution:
Other Sanctions Ordered: PLUS INTEREST ON RESTITUTION
Sanction Details: THE FIRM WAS CENSURED, FINED $125,000, AND ORDERED TO PAY$102,631.62, PLUS INTEREST, IN RESTITUTION TO CUSTOMERS.
FINE PAID IN FULL ON APRIL 11, 2016.
Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?
Allegations: FROM MAY 1, 2009 TO APRIL 30, 2014, TRIAD FAILED TO APPLY SALESCHARGE DISCOUNTS TO CERTAIN CUSTOMERS' ELIGIBLE PURCHASES OFUITS IN VIOLATION OF FINRA RULE 2010.
Allegations: FROM MAY 1, 2009 TO APRIL 30, 2014, TRIAD FAILED TO APPLY SALESCHARGE DISCOUNTS TO CERTAIN CUSTOMERS' ELIGIBLE PURCHASES OFUITS IN VIOLATION OF FINRA RULE 2010.
Resolution Date: 03/16/2016
Resolution:
Other Sanctions Ordered:
Sanction Details: FINE - $125,000RESTITUTION - $102,631.62
Sanction Details: 7/22/2015 - $7,500 ADMINISTRATIVE FINE PAID IN FULL.
Regulator Statement ON JULY 22, 2015, THE OFFICE OF FINANCIAL REGULATION ENTERED AFINAL ORDER ADOPTING THE STIPULATION AND CONSENT AGREEMENT INTHE MATTER OF TRIAD ADVISORS, INC. TRIAD ADVISORS, INC. NEITHERADMITTED NOR DENIED THE FINDINGS BUT CONSENTED TO THE ENTRYOF FINDINGS BY THE OFFICE. THE OFFICE FOUND THAT TRIAD ADVISORS,INC. FAILED TO MAINTAIN CURRENT BOOKS AND RECORDS. TRIADADVISORS, INC. AGREED TO PAY AN ADMINISTRATIVE FINE OF $7,500.
Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?
No
Sanctions Ordered: Monetary/Fine $7,500.00
Order
iReporting Source: Firm
Initiated By: STATE OF FLORIDA OFFICE OF FINANCIAL REGULATION
Allegations: VIOLATION OF RULE 69W-600.014(1), FLORIDA ADMINISTRATIVE CODE, ANDSEC RULES 17A-3 AND 17A-4 IN THAT: THE FLORIDA BRANCH FAILED TOMAINTAIN A CHECKS RECEIVED BLOTTER, TRIAD FAILED TO MAINTAIN ACOPY OF THE APPROVAL OF THE BRANCH'S STATIONARY; TRIAD FAILEDTO MAINTAIN A RECORD OF ANY ADDITIONAL REVIEW OF THEREPRESENTATIVE'S OBA.
Sanction Details: FIRM FINED: $7,500. REP FINED: $2,500. FINE REMITTED JULY 10, 2015.
Firm Statement THE FLORIDA BRANCH FAILED TO MAINTAIN A CHECKS RECEIVEDBLOTTER; TRIAD FAILED TO MAINTAIN A COPY OF THE APPROVAL OF THEBRANCH'S STATIONARY; TRIAD FAILED TO MAINTAIN A RECORD OF ANYADDITIONAL REVIEW OF THE REPRESENTATIVE'S OBA.
Sanctions Ordered: Monetary/Fine $7,500.00Cease and Desist/Injunction
Stipulation and Consent
Disclosure 5 of 8
i
Reporting Source: Regulator
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOESTABLISH, MAINTAIN AND ENFORCE AN ADEQUATE SUPERVISORYSYSTEM AND WRITTEN PROCEDURES THAT WERE REASONABLYDESIGNED TO ACHIEVE COMPLIANCE WITH APPLICABLE SECURITIESLAWS AND REGULATIONS AND NASD AND FINRA RULES, REGARDING THEUSE OF CONSOLIDATED REPORTS INCLUDING A SYSTEM USED BY ITSREPRESENTATIVES AND EXAMINATIONS OF ITS BRANCH OFFICES. THEFINDINGS STATED THAT THE FIRM HAD INADEQUATE SUPERVISORYPROCEDURES TO ADDRESS CUSTOMIZABLE REPORTS OR STRICTLYMANUALLY CREATED CONSOLIDATED REPORTS AND HAD NO SPECIFICPROCEDURE TO REVIEW AND CAPTURE CONSOLIDATED REPORTSCREATED AND PROVIDED BY ITS REPRESENTATIVES TO CUSTOMERSOTHER THAN CORRESPONDENCE REVIEW AND BRANCH EXAMINATIONS.THE FIRM'S SUPERVISORY SYSTEM FAILED TO DETECT CONSOLIDATEDREPORTS PROVIDED BY TWO FORMER REPRESENTATIVES THATCONTAINED FALSE ASSETS THAT WERE MANUALLY ENTERED. THE FIRM'SWRITTEN SUPERVISORY PROCEDURES (WSPS) REQUIRED A SPECIFICDISCLOSURE BE DISPLAYED ON OUTGOING CORRESPONDENCE BUT THEFIRM FAILED TO ADEQUATELY ENFORCE ITS PROCEDURES TO ENSURETHAT REQUIRED DISCLOSURES WERE INCLUDED ON ALLCORRESPONDENCE, INCLUDING CONSOLIDATED REPORTS. THEREQUIRED DISCLOSURE FAILED TO ADHERE TO BEST PRACTICESREGARDING DISCLOSURES ON CONSOLIDATED REPORTS SUGGESTED INFINRA REGULATORY NOTICE 10-19 AND THE FIRM FAILED TO MODIFY THEREQUIRED DISCLOSURE UNTIL IT FIRST ESTABLISHED WSPS DIRECTLYRELATING TO CONSOLIDATED REPORTS. THE FIRM'S BRANCH AUDITPROGRAM WAS DEFICIENT AND THE DEFICIENCIES CONTRIBUTED TO THEFIRM'S INABILITY TO DISCOVER A REPRESENTATIVE'S (NOW DECEASED)SALE OF FICTITIOUS PROMISSORY NOTES TO CUSTOMERS, OUTSIDE THEREGULAR COURSE AND SCOPE OF THE REPRESENTATIVE'S ASSOCIATIONWITH THE FIRM. THE FINDINGS ALSO STATED THAT THE FIRM FAILED TOREASONABLY SUPERVISE ITS REPRESENTATIVES TO ENSURECOMPLIANCE WITH APPLICABLE SECURITIES LAWS AND REGULATIONSAND NASD AND FINRA RULES. THE FIRM FAILED TO REASONABLYSUPERVISE TWO FORMER REPRESENTATIVES, ONE OF WHICH SOLDPROMISSORY NOTES OUTSIDE THE REGULAR COURSE OF THEREPRESENTATIVE'S ASSOCIATION WITH THE FIRM AND THE OTHERCONVERTED CUSTOMER FUNDS. THE FIRM AND ITS BRANCH AUDITORSFAILED TO DETECT AND INVESTIGATE THE SALE OF PROMISSORY NOTESBY ONE OF ITS REPRESENTATIVE AND THE FIRM FAILED TO DETECT ANDINVESTIGATE MANUAL ENTRIES INTO A SYSTEM, WHICH INCLUDED FALSEASSETS AND FALSE COMMITTEE ON UNIFORMSECURITIES IDENTIFICATION PROCEDURES (CUSIP) NUMBERS, WHICHWERE ENTERED BY THE SAME REPRESENTATIVE. THE FIRM FAILED TOADEQUATELY FOLLOW-UP ON A DEFICIENCY FROM A BRANCH AUDIT THATREPORTED THAT ANOTHER REPRESENTATIVE, PRIOR TO HISTERMINATION, HAD SENT CORRESPONDENCE TO CUSTOMERS WITHOUTFORWARDING COPIES TO THE HOME OFFICE FOR REVIEW. THE FINDINGSALSO INCLUDED THAT THE FIRM'S SUPERVISORY CONTROLS REPORTFOR YEAR 2010 WAS DEFICIENT AND FAILED TO FOCUS ON AREAS OF THEFIRM'S PROCEDURES SUCH AS THE USE OF CONSOLIDATED REPORTS.THE NASD RULE 3012 REPORT FOR 2010 FURTHER FAILED TO DETAILCHANGES NEEDED TO BE MADE OR CHANGES THAT WERE MADE TOTHEIR SUPERVISORY POLICIES AND PROCEDURES REGARDINGCONSOLIDATED REPORTS. FINRA FOUND THAT THE FIRM CONDUCTED ASECURITIES BUSINESS WHILE FAILING TO MAINTAIN ITS REQUIREDMINIMUM NET CAPITAL, CREATED AND MAINTAINED INACCURATE BOOKSAND RECORDS IN THAT THE FIRM FAILED TO MAINTAIN ACCURATECOMPUTATIONS OF ITS NET CAPITAL, FILED INACCURATE FINANCIAL ANDOPERATIONAL COMBINED UNIFORM SINGLE (FOCUS) REPORTS, AND DIDNOT TIMELY FILE SECURITIES EXCHANGE ACT OF 1934 RULE 17A-11NOTIFICATIONS REGARDING THE NET CAPITAL DEFICIENCIES. FINRAALSO FOUND THAT THE FIRM FAILED TO REASONABLY ENFORCE ITSPROCEDURES TO ENSURE COMPLIANCE WITH REGULATION S-PREGARDING THE ENCRYPTION OF ELECTRONIC MESSAGES CONTAININGPERSONAL CONFIDENTIAL INFORMATION AND FAILED TO DISSEMINATEPRIVACY POLICY NOTICES ON AN ANNUAL BASIS AND ADVISE CUSTOMERSOF THE "OPT-OUT" PROVISION.
WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOESTABLISH, MAINTAIN AND ENFORCE AN ADEQUATE SUPERVISORYSYSTEM AND WRITTEN PROCEDURES THAT WERE REASONABLYDESIGNED TO ACHIEVE COMPLIANCE WITH APPLICABLE SECURITIESLAWS AND REGULATIONS AND NASD AND FINRA RULES, REGARDING THEUSE OF CONSOLIDATED REPORTS INCLUDING A SYSTEM USED BY ITSREPRESENTATIVES AND EXAMINATIONS OF ITS BRANCH OFFICES. THEFINDINGS STATED THAT THE FIRM HAD INADEQUATE SUPERVISORYPROCEDURES TO ADDRESS CUSTOMIZABLE REPORTS OR STRICTLYMANUALLY CREATED CONSOLIDATED REPORTS AND HAD NO SPECIFICPROCEDURE TO REVIEW AND CAPTURE CONSOLIDATED REPORTSCREATED AND PROVIDED BY ITS REPRESENTATIVES TO CUSTOMERSOTHER THAN CORRESPONDENCE REVIEW AND BRANCH EXAMINATIONS.THE FIRM'S SUPERVISORY SYSTEM FAILED TO DETECT CONSOLIDATEDREPORTS PROVIDED BY TWO FORMER REPRESENTATIVES THATCONTAINED FALSE ASSETS THAT WERE MANUALLY ENTERED. THE FIRM'SWRITTEN SUPERVISORY PROCEDURES (WSPS) REQUIRED A SPECIFICDISCLOSURE BE DISPLAYED ON OUTGOING CORRESPONDENCE BUT THEFIRM FAILED TO ADEQUATELY ENFORCE ITS PROCEDURES TO ENSURETHAT REQUIRED DISCLOSURES WERE INCLUDED ON ALLCORRESPONDENCE, INCLUDING CONSOLIDATED REPORTS. THEREQUIRED DISCLOSURE FAILED TO ADHERE TO BEST PRACTICESREGARDING DISCLOSURES ON CONSOLIDATED REPORTS SUGGESTED INFINRA REGULATORY NOTICE 10-19 AND THE FIRM FAILED TO MODIFY THEREQUIRED DISCLOSURE UNTIL IT FIRST ESTABLISHED WSPS DIRECTLYRELATING TO CONSOLIDATED REPORTS. THE FIRM'S BRANCH AUDITPROGRAM WAS DEFICIENT AND THE DEFICIENCIES CONTRIBUTED TO THEFIRM'S INABILITY TO DISCOVER A REPRESENTATIVE'S (NOW DECEASED)SALE OF FICTITIOUS PROMISSORY NOTES TO CUSTOMERS, OUTSIDE THEREGULAR COURSE AND SCOPE OF THE REPRESENTATIVE'S ASSOCIATIONWITH THE FIRM. THE FINDINGS ALSO STATED THAT THE FIRM FAILED TOREASONABLY SUPERVISE ITS REPRESENTATIVES TO ENSURECOMPLIANCE WITH APPLICABLE SECURITIES LAWS AND REGULATIONSAND NASD AND FINRA RULES. THE FIRM FAILED TO REASONABLYSUPERVISE TWO FORMER REPRESENTATIVES, ONE OF WHICH SOLDPROMISSORY NOTES OUTSIDE THE REGULAR COURSE OF THEREPRESENTATIVE'S ASSOCIATION WITH THE FIRM AND THE OTHERCONVERTED CUSTOMER FUNDS. THE FIRM AND ITS BRANCH AUDITORSFAILED TO DETECT AND INVESTIGATE THE SALE OF PROMISSORY NOTESBY ONE OF ITS REPRESENTATIVE AND THE FIRM FAILED TO DETECT ANDINVESTIGATE MANUAL ENTRIES INTO A SYSTEM, WHICH INCLUDED FALSEASSETS AND FALSE COMMITTEE ON UNIFORMSECURITIES IDENTIFICATION PROCEDURES (CUSIP) NUMBERS, WHICHWERE ENTERED BY THE SAME REPRESENTATIVE. THE FIRM FAILED TOADEQUATELY FOLLOW-UP ON A DEFICIENCY FROM A BRANCH AUDIT THATREPORTED THAT ANOTHER REPRESENTATIVE, PRIOR TO HISTERMINATION, HAD SENT CORRESPONDENCE TO CUSTOMERS WITHOUTFORWARDING COPIES TO THE HOME OFFICE FOR REVIEW. THE FINDINGSALSO INCLUDED THAT THE FIRM'S SUPERVISORY CONTROLS REPORTFOR YEAR 2010 WAS DEFICIENT AND FAILED TO FOCUS ON AREAS OF THEFIRM'S PROCEDURES SUCH AS THE USE OF CONSOLIDATED REPORTS.THE NASD RULE 3012 REPORT FOR 2010 FURTHER FAILED TO DETAILCHANGES NEEDED TO BE MADE OR CHANGES THAT WERE MADE TOTHEIR SUPERVISORY POLICIES AND PROCEDURES REGARDINGCONSOLIDATED REPORTS. FINRA FOUND THAT THE FIRM CONDUCTED ASECURITIES BUSINESS WHILE FAILING TO MAINTAIN ITS REQUIREDMINIMUM NET CAPITAL, CREATED AND MAINTAINED INACCURATE BOOKSAND RECORDS IN THAT THE FIRM FAILED TO MAINTAIN ACCURATECOMPUTATIONS OF ITS NET CAPITAL, FILED INACCURATE FINANCIAL ANDOPERATIONAL COMBINED UNIFORM SINGLE (FOCUS) REPORTS, AND DIDNOT TIMELY FILE SECURITIES EXCHANGE ACT OF 1934 RULE 17A-11NOTIFICATIONS REGARDING THE NET CAPITAL DEFICIENCIES. FINRAALSO FOUND THAT THE FIRM FAILED TO REASONABLY ENFORCE ITSPROCEDURES TO ENSURE COMPLIANCE WITH REGULATION S-PREGARDING THE ENCRYPTION OF ELECTRONIC MESSAGES CONTAININGPERSONAL CONFIDENTIAL INFORMATION AND FAILED TO DISSEMINATEPRIVACY POLICY NOTICES ON AN ANNUAL BASIS AND ADVISE CUSTOMERSOF THE "OPT-OUT" PROVISION.
WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOESTABLISH, MAINTAIN AND ENFORCE AN ADEQUATE SUPERVISORYSYSTEM AND WRITTEN PROCEDURES THAT WERE REASONABLYDESIGNED TO ACHIEVE COMPLIANCE WITH APPLICABLE SECURITIESLAWS AND REGULATIONS AND NASD AND FINRA RULES, REGARDING THEUSE OF CONSOLIDATED REPORTS INCLUDING A SYSTEM USED BY ITSREPRESENTATIVES AND EXAMINATIONS OF ITS BRANCH OFFICES. THEFINDINGS STATED THAT THE FIRM HAD INADEQUATE SUPERVISORYPROCEDURES TO ADDRESS CUSTOMIZABLE REPORTS OR STRICTLYMANUALLY CREATED CONSOLIDATED REPORTS AND HAD NO SPECIFICPROCEDURE TO REVIEW AND CAPTURE CONSOLIDATED REPORTSCREATED AND PROVIDED BY ITS REPRESENTATIVES TO CUSTOMERSOTHER THAN CORRESPONDENCE REVIEW AND BRANCH EXAMINATIONS.THE FIRM'S SUPERVISORY SYSTEM FAILED TO DETECT CONSOLIDATEDREPORTS PROVIDED BY TWO FORMER REPRESENTATIVES THATCONTAINED FALSE ASSETS THAT WERE MANUALLY ENTERED. THE FIRM'SWRITTEN SUPERVISORY PROCEDURES (WSPS) REQUIRED A SPECIFICDISCLOSURE BE DISPLAYED ON OUTGOING CORRESPONDENCE BUT THEFIRM FAILED TO ADEQUATELY ENFORCE ITS PROCEDURES TO ENSURETHAT REQUIRED DISCLOSURES WERE INCLUDED ON ALLCORRESPONDENCE, INCLUDING CONSOLIDATED REPORTS. THEREQUIRED DISCLOSURE FAILED TO ADHERE TO BEST PRACTICESREGARDING DISCLOSURES ON CONSOLIDATED REPORTS SUGGESTED INFINRA REGULATORY NOTICE 10-19 AND THE FIRM FAILED TO MODIFY THEREQUIRED DISCLOSURE UNTIL IT FIRST ESTABLISHED WSPS DIRECTLYRELATING TO CONSOLIDATED REPORTS. THE FIRM'S BRANCH AUDITPROGRAM WAS DEFICIENT AND THE DEFICIENCIES CONTRIBUTED TO THEFIRM'S INABILITY TO DISCOVER A REPRESENTATIVE'S (NOW DECEASED)SALE OF FICTITIOUS PROMISSORY NOTES TO CUSTOMERS, OUTSIDE THEREGULAR COURSE AND SCOPE OF THE REPRESENTATIVE'S ASSOCIATIONWITH THE FIRM. THE FINDINGS ALSO STATED THAT THE FIRM FAILED TOREASONABLY SUPERVISE ITS REPRESENTATIVES TO ENSURECOMPLIANCE WITH APPLICABLE SECURITIES LAWS AND REGULATIONSAND NASD AND FINRA RULES. THE FIRM FAILED TO REASONABLYSUPERVISE TWO FORMER REPRESENTATIVES, ONE OF WHICH SOLDPROMISSORY NOTES OUTSIDE THE REGULAR COURSE OF THEREPRESENTATIVE'S ASSOCIATION WITH THE FIRM AND THE OTHERCONVERTED CUSTOMER FUNDS. THE FIRM AND ITS BRANCH AUDITORSFAILED TO DETECT AND INVESTIGATE THE SALE OF PROMISSORY NOTESBY ONE OF ITS REPRESENTATIVE AND THE FIRM FAILED TO DETECT ANDINVESTIGATE MANUAL ENTRIES INTO A SYSTEM, WHICH INCLUDED FALSEASSETS AND FALSE COMMITTEE ON UNIFORMSECURITIES IDENTIFICATION PROCEDURES (CUSIP) NUMBERS, WHICHWERE ENTERED BY THE SAME REPRESENTATIVE. THE FIRM FAILED TOADEQUATELY FOLLOW-UP ON A DEFICIENCY FROM A BRANCH AUDIT THATREPORTED THAT ANOTHER REPRESENTATIVE, PRIOR TO HISTERMINATION, HAD SENT CORRESPONDENCE TO CUSTOMERS WITHOUTFORWARDING COPIES TO THE HOME OFFICE FOR REVIEW. THE FINDINGSALSO INCLUDED THAT THE FIRM'S SUPERVISORY CONTROLS REPORTFOR YEAR 2010 WAS DEFICIENT AND FAILED TO FOCUS ON AREAS OF THEFIRM'S PROCEDURES SUCH AS THE USE OF CONSOLIDATED REPORTS.THE NASD RULE 3012 REPORT FOR 2010 FURTHER FAILED TO DETAILCHANGES NEEDED TO BE MADE OR CHANGES THAT WERE MADE TOTHEIR SUPERVISORY POLICIES AND PROCEDURES REGARDINGCONSOLIDATED REPORTS. FINRA FOUND THAT THE FIRM CONDUCTED ASECURITIES BUSINESS WHILE FAILING TO MAINTAIN ITS REQUIREDMINIMUM NET CAPITAL, CREATED AND MAINTAINED INACCURATE BOOKSAND RECORDS IN THAT THE FIRM FAILED TO MAINTAIN ACCURATECOMPUTATIONS OF ITS NET CAPITAL, FILED INACCURATE FINANCIAL ANDOPERATIONAL COMBINED UNIFORM SINGLE (FOCUS) REPORTS, AND DIDNOT TIMELY FILE SECURITIES EXCHANGE ACT OF 1934 RULE 17A-11NOTIFICATIONS REGARDING THE NET CAPITAL DEFICIENCIES. FINRAALSO FOUND THAT THE FIRM FAILED TO REASONABLY ENFORCE ITSPROCEDURES TO ENSURE COMPLIANCE WITH REGULATION S-PREGARDING THE ENCRYPTION OF ELECTRONIC MESSAGES CONTAININGPERSONAL CONFIDENTIAL INFORMATION AND FAILED TO DISSEMINATEPRIVACY POLICY NOTICES ON AN ANNUAL BASIS AND ADVISE CUSTOMERSOF THE "OPT-OUT" PROVISION.
Resolution Date: 03/12/2014
Resolution:
Other Sanctions Ordered: RESTITUTION MUST BE PAID TO CUSTOMERS IN THE AGGREGATEAMOUNT OF NO LESS THAN $375,000. UNDERTAKING: A REGISTEREDPRINCIPAL ON BEHALF OF THE FIRM SHALL CERTIFY TO FINRA IN WRITINGTHAT IT HAS CONDUCTED A COMPREHENSIVE REVIEW OF ITSSUPERVISORY SYSTEM REGARDING THE USE OF CONSOLIDATEDREPORTS BY ITS REPRESENTATIVES AS WELL AS ITS BRANCH AUDITPROCESS.
Sanction Details: SEE ABOVE. FINE PAID IN FULL ON 03/24/14.
Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?
Allegations: ON MARCH 12, 2014, TRIAD ENTERED INTO AN ACCEPTANCE, WAIVER, ANDCONSENT WITH FINRA CONCERNING CONSOLIDATED REPORTS, BRANCHAUDITS, SUPERVISION, NET CAPITAL, AND REGULATION S-P. TRIADCONSENTED TO A CENSURE, A $650,000 FINE, RESTITUTION TOCUSTOMERS TOTALING $375,000, AND A REVIEW AND REVISION TO ITSCONSOLIDATED REPORT AND BRANCH AUDIT PROCESSES.
Initiated By: FINANCIAL INDUSTRY REGULATORY AUTHORITY
Principal Sanction(s)/ReliefSought:
Civil and Administrative Penalt(ies) /Fine(s)
Other Sanction(s)/ReliefSought:
CENSURE; RESTITUTION TO CUSTOMERS; REVIEW AND REVISION TOCONSOLIDATED REPORT AND BRANCH AUDIT PROCESSES
Date Initiated: 03/12/2014
Docket/Case Number: 2011025792001
Principal Product Type: No Product
Other Product Type(s):
Allegations: ON MARCH 12, 2014, TRIAD ENTERED INTO AN ACCEPTANCE, WAIVER, ANDCONSENT WITH FINRA CONCERNING CONSOLIDATED REPORTS, BRANCHAUDITS, SUPERVISION, NET CAPITAL, AND REGULATION S-P. TRIADCONSENTED TO A CENSURE, A $650,000 FINE, RESTITUTION TOCUSTOMERS TOTALING $375,000, AND A REVIEW AND REVISION TO ITSCONSOLIDATED REPORT AND BRANCH AUDIT PROCESSES.
Resolution Date: 03/12/2014
Resolution:
Other Sanctions Ordered:
Sanction Details: 650,000.00 FINE375,000.00 RESTITUTION TO CUSTOMERS
Allegations: NASD RULES 2110, 3010 AND 6230: RESPONDENT MEMBER FIRM FAILED TOTIMELY REPORT CORPORATE BOND TRADES. IN ADDITION, THE FIRMFAILED TO ESTABLISH AND MAINTAIN A SUPERVISORY SYSTEM,INCLUDING WRITTEN SUPERVISORY PROCEDURES, REASONABLYDESIGNED TO ACHIEVE COMPLIANCE WITH NASD RULE 6230.
Sanction Details: WITHOUT ADMITTING OR DENYING THE FINDINGS, RESPONDENT MEMBERFIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OFFINDINGS; THEREFORE, FIRM IS CENSURED AND FINED $10,000.
Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?
Allegations: FROM 1/1/06 - 3/31/06, TRIAD FAILED TO REPORT 62 OF 100 CORPORATEBOND TRADES WITHIN THE TIME PERIOD PRESCRIBED BY NASD RULE6230, IN VIOLATION OF NASD RULES 2110 AND 3010. DURING THE SAMEPERIOD, TRIAD FAILED TO ESTABLISH AND MAINTAIN A SUPERVISORYSYSTEM, INCLUDING WRITTEN SUPERVISORY PROCEDURES,REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH RULE 6230, INVIOLATION OF RULES 2110 AND 3010.
Regulator Statement OPERATED BRANCHES WITHOUT THE BENEFIT OF REGISTRATION.UNREGISTERED ACTIVITY.
iReporting Source: Firm
Initiated By: FLORIDA
Principal Sanction(s)/ReliefSought:
Cease and Desist
Other Sanction(s)/ReliefSought:
Date Initiated: 08/02/2002
Docket/Case Number: 3517-5-08/02
Principal Product Type: No Product
Other Product Type(s):
Allegations: UNREGISTERED BRANCH ACTIVITY
Current Status: Final
Resolution Date: 10/07/2002
Resolution:
Other Sanctions Ordered:
Sanction Details: N/A
Firm Statement OPERATED BRANCHES WITHOUT BENEFIT OF REGISTRATION.UNREGISTED ACTIVITY.
Sanctions Ordered: Monetary/Fine $5,000.00Cease and Desist/Injunction
Stipulation and Consent
Disclosure 8 of 8
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Reporting Source: Regulator
Allegations: THE BROKER-DEALER VIOLATED RULE 307 OF THE VASECURITIES ACT IN THAT IT FAILED TO NOTIFY THE DIVISION INWRITING WITHIN THREE BUSINESS THAT ITS NET WORTH DROPPEDBELOW$25,000 AND FAILED TO TAKE IMMEDIATE ACTION TO ESTABLISH A$25,000 NET WORTH.
Initiated By: VIRGINIA DIVISION OF SECURITIES AND RETAILFRANCHISING
Principal Sanction(s)/ReliefSought:
Other Sanction(s)/ReliefSought:
Date Initiated: 07/03/1991
Docket/Case Number: SEC910062
URL for Regulatory Action:
Principal Product Type:
Other Product Type(s):
THE BROKER-DEALER VIOLATED RULE 307 OF THE VASECURITIES ACT IN THAT IT FAILED TO NOTIFY THE DIVISION INWRITING WITHIN THREE BUSINESS THAT ITS NET WORTH DROPPEDBELOW$25,000 AND FAILED TO TAKE IMMEDIATE ACTION TO ESTABLISH A$25,000 NET WORTH.
Resolution Date: 07/03/1991
Resolution:
Other Sanctions Ordered:
Sanction Details: AS AN OFFER TO SETTLE ALL MATTERS AND WITHOUTADMITTING OR DENYING GUILT, THE BROKER-DEALER AGREES TOCOMPLYWITH RULE 307 AND PAID TO THE COMMONWEALTH OF VIRGINIA APENALTY IN THE AMOUNT OF $500.00.
Regulator Statement FOR FURTHER INFORMATION, CONTACT SHERYL DEVAUN,REGISTRATION EXAMINER, (804) 786-7751.
Sanctions Ordered: Monetary/Fine $500.00
Consent
iReporting Source: Firm
Initiated By: STATE OF VIRGINIA
Date Initiated: 07/03/1991
Docket/Case Number:
Principal Product Type: No Product
Allegations: FAILED TO NOTIFY VIRGINIA OF A NET WORTH BELOW $25,000 (AS IMBSECURITIES, INC.)
Brokerage firms are not required to report arbitration claims filed against them by customers; however, BrokerCheckprovides summary information regarding FINRA arbitration awards involving securities and commodities disputesbetween public customers and registered securities firms in this section of the report. The full text of arbitration awards issued by FINRA is available at www.finra.org/awardsonline.
Disclosure 1 of 5
Reporting Source: Regulator
Type of Event: ARBITRATION
Arbitration Forum:
Case Initiated:
Case Number:
Allegations:
Disputed Product Type:
Sum of All Relief Requested:
Disposition:
Disposition Date:
Sum of All Relief Awarded:
NASD
01/11/2002
01-06687
ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNT RELATED-BREACH OF CONTRACT; ACCOUNTRELATED-NEGLIGENCE
NO OTHER TYPE OF SEC INVOLVE; UNKNOWN TYPE OF SECURITIES
$103,000.00
AWARD AGAINST PARTY
02/20/2003
$103,000.00
There may be a non-monetary award associated with this arbitration.Please select the Case Number above to view more detailed information.
ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSION OF FACTS;ACCOUNT ACTIVITY-OTHER; ACCOUNT ACTIVITY-SUITABILITY; ACCOUNTRELATED-BREACH OF CONTRACT; ACCOUNT RELATED-FAILURE TOSUPERVISE; ACCOUNT RELATED-NEGLIGENCE
MUTUAL FUNDS; VARIABLE ANNUITIES
$16,419,748.00
AWARD AGAINST PARTY
07/16/2012
$260,147.33
There may be a non-monetary award associated with this arbitration.Please select the Case Number above to view more detailed information.
Disclosure 5 of 5
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Reporting Source: Regulator
Type of Event: ARBITRATION
Arbitration Forum:
Case Initiated:
Case Number:
Allegations:
Disputed Product Type:
Sum of All Relief Requested:
Disposition:
Disposition Date:
Sum of All Relief Awarded:
FINRA
12/23/2020
20-04151
ACCOUNT ACTIVITY-BRCH OF FIDUCIARY DT; ACCOUNT ACTIVITY-MISREPRESENTATION; ACCOUNT ACTIVITY-OMISSION OF FACTS;ACCOUNT ACTIVITY-OTHER; ACCOUNT ACTIVITY-VIOLATE OF BLUE SKYLWS; ACCOUNT RELATED-BREACH OF CONTRACT; ACCOUNT RELATED-FAILURE TO SUPERVISE; ACCOUNT RELATED-NEGLIGENCE
BUSINESS DEVELOPMENT COMPANY (BDCS)
$71,685.00
AWARD AGAINST PARTY
10/06/2021
$65,000.00
There may be a non-monetary award associated with this arbitration.Please select the Case Number above to view more detailed information.