WASHINGTON — The Financial Industry Regulatory Authority (FINRA) announced today that it has sanctioned three firms – H. Beck, Inc., LaSalle St. Securities, LLC, and J.P. Turner & Company, LLC – with fines of $425,000, $175,000 and $100,000, respectively, for inadequate supervision of consolidated reports provided to customers and other violations.
A consolidated report is a single document that combines information regarding most or all of a customer's financial holdings, regardless of where those assets are held. Consolidated reports supplement, but do not replace official customer account statements required by FINRA rules and disseminated through a separate process. FINRA Regulatory Notice 10-19 reminds firms that consolidated reports must be clear, accurate and not misleading, and if not rigorously supervised, they can raise a number of regulatory concerns, including the potential for communicating inaccurate, confusing or misleading information to customers, lapses in supervisory controls, and the use of these reports for fraudulent or unethical purposes. The Notice also stresses that if a firm is unable to adequately supervise the use of the reports, it must prohibit their dissemination and take steps to ensure that registered representatives comply with the prohibition.
During the course of routine examinations of the firms, FINRA found that numerous registered representatives of the firms prepared and disseminated consolidated reports to customers either without adequate review or any prior review by a principal. H. Beck and J.P. Turner did not have any written procedures specifically addressing the use and supervision of consolidated reports. While LaSalle St. Securities had written procedures related to consolidated reports, it failed to enforce the procedures and did not provide proper training to its representatives regarding their use.
Across each firm, many registered representatives utilized consolidated report systems that allowed them to enter customized values for accounts or investments held away from the firm yet the firms' procedures did not provide safeguards, such as requiring supporting data, to verify accuracy.
Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, "Inadequate controls around consolidated reporting create the risk that unscrupulous representatives will provide inaccurate and misleading reports to their clients to conceal fraud and theft. These actions along with previous actions involving consolidated reports should be a message to firms that we will continue to examine for this issue and sanction firms that are not supervising this function properly."
In concluding these settlements, H. Beck, Inc., LaSalle St. Securities and J.P. Turner neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
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 2014, members of the public used this service to conduct 18.9 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999. Investors may find copies of this disciplinary action as well as other disciplinary documents in FINRA's Disciplinary Actions Online database.
FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. 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 all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, and informing and educating the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers the largest dispute resolution forum for investors and firms. For more information, please visit www.finra.org.