FINRA Sanctions CV Brokerage For Failure To Supervise
CV Brokerage Inc. a securities broker dealer headquartered in West Conshohocken Pennsylvania has been censured and fined $100,000.00 by Financial Industry Regulatory Authority (FINRA) based upon accusations that the firm neglected to supervise its stockbrokers’ private securities transactions to ensure compliance with FINRA rules. Letter of Acceptance Waiver and Consent No. 2017052325902 (July 2, 2019).
According to the AWC, one of the firm’s stockbrokers, Brenda Ann Smith, engaged in a number of private securities transactions while employed by the firm. Apparently, customers of CV Brokerage Inc. had been involved in two of those private securities transactions. The AWC stated one activity of Smith’s concerned an investment fund she created in February of 2016 which had been managed by her investment advisory. Apparently, hundreds of millions of dollars in trades had been effected by the fund which resulted in Smith being highly compensated for her work.
During this time, the written supervisory procedures utilized by the firm mandated that it authorize any private securities transaction before the stockbroker could participate in it. Additionally, the written supervisory procedures mandated that the securities transaction be placed on the firm’s records and books when the stockbroker participated in the outside transaction for compensation. Finally, the firm was required under its written supervisory procedures to provide supervision of the stockbrokers’ involvement in the private securities transaction just like any other transaction that a stockbroker would effect on behalf of the firm.
Evidently, an exception to the firm’s rules had been made for Smith. Particularly, CV Brokerage enabled Smith to supervise herself to ensure that she complied with CV Brokerage’s procedures governing private securities transactions. FINRA noted that the firm could have involved a different supervisor to review and monitor Smith’s activities but chose not to. FINRA revealed that there had been no analysis performed by the firm, or documentation prepared by the firm, before it allowed Smith to supervise her private securities transactions.
The AWC also revealed that Smith’s participation in the private securities transactions was not supervised by the firm. The investment fund’s trades were apparently not supervised as though they were executed on behalf of CV Brokerage. Further, there were no transactions that had been placed on the records and books of the firm. FINRA determined that that CV Brokerage’s supervisory system was not equipped to comply with FINRA Rule 3280(c) in this respect. Consequently, FINRA found the firm’s supervisory failures to be violative of FINRA Rules 2010, 3280(c), 3110(a) and 3110(b).