The Leaders Group Inc. a brokerage firm headquartered in Littleton Colorado has been censured and fined $95,000.00 by Financial Industry Regulatory Authority (FINRA) based upon consenting to findings of supervisory failures including the firm’s failure to supervise variable annuity suitability as well as registered representatives’ outside business activities. Letter of Acceptance Waiver and Consent No. 2014038972001 (July 2, 2018).

According to the AWC, between May of 2012 and September of 2014, the firm neglected to create and implement an adequate supervision system to examine suitability of contributions made by customers to annuities when done so at the recommendation of a registered representative of the firm. The AWC stated that the firm’s variable annuity supervision was lacking in circumstances where a customer of the firm bought an annuity based on a registered representative’s advice but did not make significant contributions until a subsequent time. Evidently, those contributions had been provided to the issuer of the annuities prior to the firm conducting a review for suitability. Consequently, the firm failed to ensure that annuity contributions were suitable for customers; conduct violative of FINRA Rule 2010 and National Association of Securities Dealers (NASD) Rule 3010(a).

The AWC further revealed that the firm failed to evaluate outside business activities pursued by registered representatives of the firm. Evidently, the firm’s written supervisory procedures called for outside business activities to be evaluated and documented by the firm. A number of registered representatives made outside business disclosures to the firm from May of 2012 to September of 2014; however, the firm failed to produce any records which demonstrated that it actually reviewed and assessed the activities reported by registered representatives. Consequently, FINRA found that the firm’s conduct was violative of FINRA Rules 2010 and 3270 as well as National Association of Securities Dealers (NASD) Rule 3010(b).

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