FINRA Sanctions Moloney Securities For Failure To Supervise
Moloney Securities Co. Inc. a securities broker dealer headquartered in Manchester Missouri has been censured and fined $100,000.00 by Financial Industry Regulatory Authority (FINRA) based upon allegations that Moloney failed to supervise its stockbrokers with a view towards ensuring that their transactions were suitable for customers. Letter of Acceptance Waiver and Consent No. 2015046315102 (May 4, 2020).
According to the AWC, between January of 2013 and April of 2015, there was no supervision system created or implemented by Moloney Securities that was sufficient for purposes of addressing qualitative suitability and issues concerning the concentration of investors’ assets in risky investments. The securities broker dealer tasked its regional management with reviewing trades but there was inadequate training and guidance provided to management concerning low-priced securities and how to handle accounts containing concentrations in those risky investments.
The AWC stated that equity transactions had been reviewed by regional management via an electronic surveillance system that Moloney Securities’ clearing firm provided. That system was deficient because it was not set up to assess qualitative suitability or concentrations in risky investments. Moloney Securities enlisted its management to undertake manual reviews to address suitability concerns, but management personnel had not been provided with any trainings or guidance on how to execute those reviews. FINRA also pointed out that there were no other automated tools that Moloney Securities provided to help management conduct reviews. FINRA found that the securities broker dealer’s supervision system was not adequately geared towards complying with FINRA Rule 2111 for this reason.
The AWC stated that between January of 2013 and April of 2015, five elderly customers had been advised by Moloney Securities stockbroker JM to buy oil and gas exchange traded funds and speculative oil and gas limited partnerships. Those customers maintained objectives of preservation of principle and income as well as balanced growth. FINRA stated that the customers’ accounts had been concentrated in risky investments because of JM. This went undetected because of the failure of Moloney Securities’ surveillance system to produce alerts based on concentration.
FINRA also indicated that customer LM had been advised by JM to buy six oil and gas limited partnerships. The AWC revealed that the customer’s risk tolerance was moderate yet LM had nearly sixty-four percent of her net worth invested in the limited partnerships by June of 2015. The customer sustained $15,474.13 in investment losses when she moved her account out of Moloney Securities. FINRA determined that the securities broker dealer’s failure to supervise constituted the violation of FINRA Rules 3110 and National Association of Securities Dealers (NASD) Rule 3010.