Melissa A. Strouse, of San Diego, California, a stockbroker currently registered with First Financial Equity Corporation, has been fined $10,000.00 and suspended from associating with any Financial Industry Regulatory Authority (FINRA) member in any principal capacity based upon an FINRA Office of Hearing Officers’ Order Accepting Offer of Settlement containing findings that she failed to supervise trading activities in her firm for excessive commissions and churning. Department of Enforcement v. First Financial Equity Corporation et al., No. 2013034966701 (Mar. 8, 2017).
According to the Order, between January 1, 2010, and June 23, 2013, at a time when the firm was plagued with supervisory mishaps, Strouse worked in the capacity of chief compliance officer for the firm, wherein she was tasked with ensuring that the supervisory systems and compliance protocols of the firm were effectively managed. Additionally, Strouse was reportedly the primary supervisor for the main office location of the firm where substantial supervision failures had originated from.
Particularly, the Order stated that no written supervisory procedures concerning suitability requirements were adequately designed to ensure that transactions were effected in a suitable fashion, or that registered representatives under heightened supervision were managed properly. Apparently, procedures and processes which the firm utilized did not confirm that the firm procured required information from customers to make suitable investment strategy and securities recommendations. The Order also stated that Strouse failed to detail the rate and manner in which heightened supervision reviews would be conducted, as well as how the firm would document that heightened supervision reviews occurred.
Moreover, the firm reportedly lacked written supervisory procedures pertaining to the sale and supervision of exchange traded fund products. Specifically, the firm’s operations allowed for leveraged and inverse exchange traded funds to be bought and sold via the firm’s staff; however, there were no procedures which related to the sales and supervision of the transactions.
Further, the firm’s written supervisory procedures called for discretionary accounts to be reviewed by a supervisor in order to identify and prevent excessive trading activity in customer accounts. The firm’s procedures also required a monthly review of discretionary accounts in order to identify atypical patters of trading as well as issues regarding the suitability of transactions. Yet, the Order stated that the firm’s procedures had not been enforced; Strouse failed to provide approvals regarding the firm’s discretionary accounts in the main office location, or supervise customers’ investment accounts for excessive trading and churning.
The Order stated that it was Strouse’s responsibility to make sure that the firm’s supervision systems and protocols were compliant; and her failure to do so was conduct violative of FINRA Rule 2010 and NASD Rule 3010(b). Additionally, FINRA cited Strouse for failing to properly enforce supervisory procedures concerning the review of accounts for excessive trading and churning, as well as discretionary trading. Strouse’s conduct in this regard was found by FINRA to be violative of FINRA Rule 2010 and NASD Rule 3010(b).
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