Washington, D.C. — The Financial Industry Regulatory Authority (FINRA) announced today that it has fined and suspended 16 current and former registered representatives of State Farm VP Management Corp. of Bloomington, IL, for misconduct involving FINRA's Continuing Education requirements for registered representatives.
The individual representatives received fines ranging from $5,000 to $10,000 and suspensions ranging from 30 days to six months. One representative also was barred as a principal. State Farm VP Management Corp. is engaged in the business of selling mutual funds and variable products.
Nine of the sanctioned representatives were supervisors who directed or allowed subordinates to take State Farm's "Firm Element" proficiency test for them. One was a supervisor who directed a subordinate to take the test for other registered representatives. Six of the sanctioned representatives completed the Firm Element test for their superiors.
The representatives engaged in this misconduct without any authorization from State Farm. State Farm reported the misconduct to FINRA after uncovering test-taking irregularities in one of its regions and conducting a preliminary investigation. State Farm then expanded its internal investigation nationwide and provided FINRA with its findings.
"The Continuing Education requirement leads to better trained and informed securities industry professionals and promotes investor protection," said Susan L. Merrill, FINRA Executive Vice President and Chief of Enforcement. "In this case, while the failures by the firm's brokers to complete the requirements are disappointing enough, it is especially troubling that supervisors directed subordinates to help them avoid this important requirement."
Since 1995, FINRA, in conjunction with other self-regulatory organizations and the Securities Industry/Regulatory Council on Continuing Education, has administered a two-part mandatory Continuing Education Program. The Continuing Education requirements consist of a Regulatory Element and a Firm Element. The Regulatory Element requires all registered persons to take computer-based training, devoted to industry rules and regulations, on the second anniversary of their initial securities registration and every three years thereafter. The Firm Element requires firms to administer appropriate training to their registered persons who have direct contact with customers, and to the registered persons' immediate supervisors, on an ongoing basis. The training must cover topics specifically related to their business, such as new products, sales practices, risk disclosure, and new regulatory requirements and concerns.
The 2005 Firm Element designed by State Farm was an internal, computer-based system. Covered representatives were required to complete a two-hour training session and then pass a proficiency test with a minimum score of 80%. In order to access the Firm Element training session and proficiency test, the participant was required to sign on to the system using a user ID and password. The subordinate representatives who took the test for their superiors signed on as the superiors for whom they were taking the test, using the superiors' user IDs and passwords.
One sanctioned representative, a former registered principal of the firm, Rebecca Sappington, was fined $10,000, barred as a principal and suspended for six months in all capacities. FINRA found that Sappington directed a subordinate to obtain the user IDs and passwords of at least four State Farm registered representatives working in her area, and complete the Firm Element program for these representatives by taking their proficiency tests. When Sappington learned that her directive had not been carried out, she instructed her subordinate to delegate the task to another person, who was an unregistered and newly hired employee of State Farm. This unregistered person then obtained the user IDs and passwords for at least four representatives, logged onto the system and completed the Firm Element program for the representatives by taking their proficiency tests.
In concluding these settlements, the registered representatives neither admitted nor denied the charges, but consented to the entry of FINRA's findings. The individuals agreed to the following sanctions:
Series 26 Principals who directed a subordinate to take their proficiency tests:
- Todd Rindfuss received a $10,000 fine, a six-month suspension as a principal and a 90-day suspension in all capacities.
- Michael Stansbury received a $10,000 fine, a six-month suspension as a principal and a 90-day suspension in all capacities.
Series 26 Principal who directed subordinates to take the test for others:
- Rebecca Sappington received a $10,000 fine, a bar as a principal and a six-month suspension in all capacities
Series 6 Representatives who directed or allowed a subordinate to take their proficiency tests:
- Jeffery Coleman received a $5,000 fine and a 60-day suspension.
- Walter Culbreth received a $5,000 fine and a 60-day suspension.
- Beverly Lochard received a $5,000 fine and a 60-day suspension.
- William Nickum received a $5,000 fine and a 60-day suspension.
- Robert Olive received a $5,000 fine and a 60-day suspension.
- Valerie Tichy-Drummer received a $5,000 fine and a 60-day suspension.
- Karen Curtis received a $5,000 fine and a 60 day suspension.
Series 6 Representatives who completed the proficiency tests for their superiors:
- Kenneth Capell received a $5,000 fine and a 30-day suspension.
- Mayka Hardy received a $5,000 fine and a 30-day suspension.
- Teresa King received a $5,000 fine and a 30-day suspension.
- Lori Love received a $5,000 fine and a 30-day suspension.
- Heather Montagne received a $5,000 fine and a 30-day suspension.
- John Reich received a $5,000 fine and a 30-day suspension.
Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA's BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2007, members of the public used this service to conduct 6.7 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999.
FINRA is the largest non-governmental regulator for all securities firms doing business in the United States. Created in 2007 through the consolidation of NASD and NYSE Member Regulation, FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business - from registering and educating industry participants to examining securities firms; writing rules; enforcing those rules and the federal securities laws; informing and educating the investing public; providing trade reporting and other industry utilities; and administering the largest dispute resolution forum for investors and registered firms.
For more information, please visit our Web site at www.finra.org.