Firm Owner Sanctioned for Failing to Supervise Two Registered Representatives
WASHINGTON — FINRA announced today that it has ordered New Jersey-based broker-dealer Buckman, Buckman & Reid, Inc. (BBR) to pay approximately $205,000 in restitution to seven customers for failing to reasonably supervise two former registered representatives who recommended excessive and unsuitable trades in multiple customer accounts. As part of the settlement, FINRA also required the firm to review and revise its supervisory system and written supervisory procedures. FINRA previously barred both registered representatives from the industry.
Additionally, FINRA sanctioned Harry John (Chip) Buckman, Jr., a Senior Vice President and one of BBR’s owners, for failing to supervise the two registered representatives, both of whom reported directly to Buckman. FINRA suspended Buckman from associating with any FINRA member in any principal capacity for three months, assessed a $20,000 fine, and required him to complete 40 hours of continuing education concerning supervisory responsibilities.
“A firm and its supervisors must be vigilant in identifying and responding to unsuitable activity such as excessive trading and unsuitable concentration of customer accounts, which can result in significant customer harm,” said Susan Schroeder, FINRA’s Executive Vice President, Department of Enforcement. “In this matter, FINRA has prioritized ensuring that affected customers receive full restitution, the firm fixes its supervisory flaws, and the responsible supervisor is held accountable and receives additional training. Due to the firm’s financial condition, FINRA did not impose a fine in addition to these other sanctions – the firm’s limited resources are better spent on remedial measures designed to prevent similar misconduct in the future.”
FINRA found that BBR and Buckman failed to identify that one of the barred registered representatives, identified as “GK,” had engaged in frequent and short-term trading of Unit Investment Trusts (UITs) and other long-term investments with significant up-front costs. For example, GK recommended that a retired couple with an investment objective of “balance/conservative growth” buy and then promptly sell UITs and other long-term investments on 15 separate occasions in a 12-month period. Although GK’s trading appeared on monthly reports of potentially excessive trading, no one at BBR actually reviewed the reports. From 2013 to 2014, GK’s excessive trading of UITs and other long-term products caused his customers to pay approximately $210,000 in commissions and resulted in losses of approximately $163,000.
BBR and Buckman also failed to identify that the second barred registered representative, identified as “RI,” had excessively traded three customers’ accounts. For example, RI made more than 130 trades in the account of an 89 year-old retired customer during a one-year period. Although this customer’s account regularly appeared on BBR’s monthly reports of potentially problematic activity, no one at BBR actually reviewed those reports or conducted reasonable suitability reviews.
BBR and Buckman also failed to reasonably supervise RI’s recommendations that four additional customers purchase concentrated positions in a single, speculative security. For example, RI recommended that one customer, whose net worth was less than $200,000, invest all of her account holdings in the speculative stock. Although BBR and Buckman were aware that RI had recommended concentrated positions in the stock to customers, neither Buckman nor anyone at BBR took any measures to determine the concentration levels or whether they were suitable for the customers in question.
In settling this matter, BBR and Buckman neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
FINRA is a not-for-profit organization dedicated to investor protection and market integrity. It regulates one critical part of the securities industry – brokerage firms doing business with the public in the United States. FINRA, overseen by the SEC, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs 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 a dispute resolution forum for investors and brokerage firms and their registered employees. For more information, visit www.finra.org.