FINRA Disciplinary Actions September 2024: Key Takeaways

In its latest report, FINRA highlighted several significant disciplinary actions for September 2024, targeting both firms and individuals for violations of securities laws and regulatory requirements. These enforcement actions are crucial in maintaining integrity and investor protection within the financial services industry. Below is an overview of the most notable cases, key takeaways, and how FNEX Capital helps firms navigate complex compliance challenges.

Key Takeaways:

Regulation Best Interest (Reg BI): Several firms, including Merrill Lynch and The Jeffrey Matthews Financial Group, were sanctioned for failing to comply with Reg BI, demonstrating FINRA’s focus on ensuring that firms prioritize customer interests.
Supervisory Failures: A recurring theme in the sanctions involved failures in establishing and maintaining adequate supervisory systems. UBS and PFS Investments, among others, faced penalties for not detecting or addressing red flags and misconduct.
Investor Protections: Firms were penalized for failing to provide fee waivers and for charging unfair prices, highlighting the importance of transparency and fairness in customer dealings.
Individual Accountability: Several individuals were barred from the industry for misconduct, including falsifying documents and failing to cooperate with investigations, showing FINRA’s zero-tolerance policy for ethical breaches.

Background:

FINRA, the Financial Industry Regulatory Authority, is responsible for overseeing and regulating brokerage firms and their registered representatives. Through regular monitoring, investigations, and enforcement actions, FINRA ensures that firms operate in compliance with securities laws and adhere to ethical standards. The disciplinary actions announced in September 2024 reflect the organization’s commitment to upholding the rules that protect investors and maintain fair market practices. These actions also serve as a reminder to firms about the importance of establishing strong compliance and supervisory systems.

FINRA Disciplinary Actions September 2024: Key Takeaways by FNEX

Major Firm Sanctions:

Cantone Research Inc. (CRD #26314, Eatontown, New Jersey)
The SEC upheld findings of material misrepresentations in private placements and inadequate supervision. Sanctions were remanded for reconsideration by FINRA.
Merrill Lynch, Pierce, Fenner & Smith Incorporated (CRD #7691, New York, New York)
Merrill Lynch was fined $1.5 million for failing to adhere to Reg BI by recommending products that led to unnecessary customer expenses.
RBC Capital Markets, LLC (CRD #31194, New York, New York)
RBC was fined $75,000 for failing to offer mutual fund sales charge waivers, resulting in excess fees for customers.
SI Securities, LLC (CRD #170937, Boston, Massachusetts)
SI Securities failed to return investor funds following a material change in a private placement and neglected to report customer complaints. The firm was fined $185,000.
Lincoln Financial Distributors, Inc. (CRD #145, Radnor, Pennsylvania)
Lincoln Financial was fined $300,000 for directing transaction-based compensation to an unregistered entity, violating securities laws.
UBS Financial Services Inc. (CRD #8174, Weehawken, New Jersey)
UBS was fined $850,000 for failing to detect and prevent unauthorized securities transactions, leading to significant customer losses.
FNBB Capital Markets, LLC (CRD #132091, Birmingham, Alabama)
FNBB was fined $30,000 for not including required mark-up/mark-down information on municipal securities transaction confirmations.
PFS Investments Inc. (CRD #10111, Duluth, Georgia)
PFS was fined $60,000 for failing to monitor outside business activities of its representatives as required by FINRA rules.
Piper Sandler & Co. (CRD #665, Minneapolis, Minnesota)
Piper Sandler was fined $25,000 for allowing an unqualified individual to perform municipal securities activities without proper registration.
The Jeffrey Matthews Financial Group, L.L.C. (CRD #41282, Florham Park, New Jersey)
The firm was fined $35,000 for failing to implement Reg BI compliance measures and maintain appropriate supervisory procedures.

Individual Sanctions:

Several individuals were also sanctioned for violations ranging from misappropriating funds to falsifying documents and refusing to cooperate with investigations. Noteworthy cases include:

Jeffrey Thomas Higgins (CRD #2871443, Baker City, Oregon) was barred from the securities industry for refusing to cooperate with a FINRA investigation into misdirecting client funds.
Kaitlyn S. Potter (CRD #7398611, Concord, North Carolina) was barred after being terminated for filing false claims and refusing to provide documents during FINRA’s investigation.
Zachary Ross McCraw (CRD #7003820, Canton, Mississippi) was barred for using non-genuine electronic client signatures and ceasing cooperation with investigators.

FNEX Capital: Comprehensive Compliance Solutions

As regulatory compliance becomes more intricate and critical, financial firms need expert guidance to navigate the complexities of operating within the securities industry. FNEX Capital provides turn-key broker-dealer registration and ongoing compliance management, allowing firms to focus on growth while remaining compliant with regulatory standards.