T. ROWE PRICE INVESTMENT SECURITIES, INC. CENSURED AND FINED FOR FAULTY MUTUAL FUND PROSPECTUSES

T. Rowe Price Investment Securities, Inc., a Baltimore, Maryland based brokerage firm, submitted a letter of acceptance, waiver, and consent after the Financial Industry Regulatory Authority (FINRA) entered findings alleging that it failed to deliver prospectuses to mutual fund customers within three business days of their purchases. FINRA stated that the firm's clearing firm contracted with a third-party service provider for the delivery of mutual fund prospectuses for some of the clearing firm's introducing brokers, including the firm. On a daily basis, the clearing firm provided the service provider with electronic information regarding mutual fund transactions requiring delivery of a prospectus to the firm's customers. The clearing firm also provided daily and monthly reports to the firm. The firm did not establish or implement adequate systems or procedures for review of the daily reports. Although the firm's procedures required review of the monthly reports, they did not adequately describe what the reviewer was required to look for or what actions the reviewer was required to take in the event that prospectus delivery deficiencies were identified. FINRA further stated that the firm did not take sufficient actions to ensure that all of its customers were receiving prospectuses on time. In addition, FINRA stated that because of the firm's failure to timely deliver prospectuses to certain customers who purchased mutual funds, these customers were not provided with important disclosures about these products by settlement date in contravention of the Securities Act. The firm was censured and fined a total of $40,000 for all violations.
A prospectus is a document that discloses important information about an investment. It typically provides investors with material information about mutual funds, stocks, bonds, and other investments. Such information generally includes a description of the company's business, financial statements, biographies of officers and directors, detailed information about their compensation, any litigation that is taking place, a list of material properties, and any other material information.
T. Rowe Price Investment Securities was required to establish and maintain a supervisory system and written supervisory procedures (WSPs) reasonably designed to monitor and ensure the timely delivery of mutual fund prospectuses. FINRA found that the firm's WSPs did not require an adequate review of the service provider's performance of its prospectus deliveries. Instead, the firm's system for supervising the timely delivery of mutual fund prospectuses involved substantial reliance on the clearing firm and the service provider. FINRA concluded that the firm lacked an adequate supervisory system or procedure that was reasonably designed to ensure that mutual fund prospectuses were being delivered on a timely basis consistent with the Securities Act, and failed to implement and maintain such a supervisory system and WSPs.
Have you suffered losses in your T. Rowe Price Investment Securities brokerage account? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against T. Rowe Price Investment Securities stockbrokers who may have engaged in misconduct and caused investors losses.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

STATE FARM VP MANAGEMENT CORP. CENSURED AND FINED FOR VARIOUS SECURITIES LAWS VIOLATIONS

State Farm VP Management Corp., a Bloomington, Illinois based brokerage firm, submitted a letter of acceptance, waiver, and consent after the Financial Industry Regulatory Authority (FINRA) entered findings that the firm failed to establish, maintain, and enforce a supervisory system or written supervisory procedures (WSPs) reasonably designed to ensure timely delivery of mutual fund prospectuses, when it was required to provide all customers who purchased a mutual fund a prospectus for that fund no later than three business days after the transaction. FINRA's findings stated that the firm executed numerous mutual fund purchase transactions that required it to deliver a mutual fund prospectus to the purchasing customer, and as such, establish and maintain a supervisory system and WSPs reasonably designed to oversee and ensure the timely delivery of mutual fund prospectuses. FINRA also stated that the firm failed to establish, maintain, and enforce an adequate supervisory system or written procedures to supervise mutual fund prospectus delivery, when it had inadequate systems and procedures in place to monitor and ensure compliance with its WSPs directive concerning delivery of a current mutual fund prospectus by its brokers to each client prior to or at the time of the sales presentation in which the broker recommended or discussed a specific mutual fund. The firm was censured and fined a total $155,000 for all violations.
A prospectus is a document that discloses important information about an investment. It typically provides investors with material information about mutual funds, stocks, bonds, and other investments. Such information generally includes a description of the company's business, financial statements, biographies of officers and directors, detailed information about their compensation, any litigation that is taking place, a list of material properties, and any other material information.
In addition, FINRA stated that the firm also had inadequate systems and procedures in place to monitor the performance of its third-party service provider in order to ensure that mutual fund prospectuses were being delivered timely. The findings also included that the firm failed to enforce its procedures requiring delivery of undated mutual fund prospectuses to certain fund holders. The firm's procedures required delivery of mutual fund prospectuses following fund companies' annual updates to their prospectuses. However, during a period, the firm failed to deliver prospectuses to certain mutual fund holders following the annual updates of the funds' prospectuses. During that period, the firm's customers were given an option to opt out of house-holding when completing paper applications. The firm did not adequately monitor its third-party vendor to ensure the mailing list was complete, and as a result, the firm failed to deliver updated prospectuses to certain fund holders as its procedures required.
Moreover, FINRA found that the firm failed to implement a supervisory system and procedures that were reasonably designed to review, monitor, and store email brokers sent to customers. The firm allowed brokers to use an email program for pre-approved email communications with customers and used a third party service provider for email archival. For supervisory purposes, all brokers were required to copy all securities-related messages into a designated mailbox. The firm's compliance department was responsible for reviewing the emails in that box. The firm did not retain securities related emails not copied to this mailbox, but established procedures to verify whether brokers were complying with these directives. The firm was aware that not all of its brokers were complying with firm procedures. Because of the reviews, the firm discovered numerous incidents of noncompliance with firm guidelines regarding selected brokers' use of the mailbox. Although the firm made this discovery, it failed to conduct deeper reviews or modify its procedures.
Have you suffered losses in your State Farm VP Management Corp. brokerage account? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against State Farm VP Management Corp. stockbrokers who may have engaged in misconduct and caused investors losses.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

SANTANDER INVESTMENT SECURITIES INC. FINED AND CENSURED FOR FAILING TO SUPERVISE FOREIGN FUND OFFERINGS

Santander Investment Securities Inc., a brokerage firm based in New York, New York, submitted a letter of acceptance, waiver, and consent after the Financial Industry Regulatory Authority (FINRA) entered findings that a registered firm principal had been tasked with gathering interest within the institutional investor community in the U.S. for funds managed by a non-FINRA-regulated fund manager affiliated with the firm but located outside the U.S. The principal, along with other brokers and several non-registered personnel, contacted investors about the future purchase of the non-U.S. funds. FINRA stated that the firm failed to have a registered person supervise the principal and other registered personnel in connection with contacting U.S. institutional investors about the funds. The firm did not have a system to adequately supervise communications between the principal, other brokers, non-registered firm employees, and the investors concerning the purchase of the non-U.S. funds. The firm was censured and fined total of $350,000 for the violations.
Brokerage firms must establish and implement a reasonable supervisory system to protect customers from abusive sales practices. If brokerage firms do not establish and/or implement a reasonable supervisory system, they may be liable to investors for damages flowing from the unsupervised conduct.
FINRA's findings further stated that the communications occurred at presentations to potential investors where sales literature was distributed. The firm did not designate a firm-registered individual to ensure its policies and procedures were enforced in this area. The firm did not apply its existing policies and procedures related to communications with the public and the review and approval of the fund materials and presentations. None of the materials were reviewed or approved by the firm's compliance department to ensure the materials were fair and balanced. The firm also failed to maintain copies of the distributed material as required. Moreover, FINRA stated that the principal distributed communications to the investing public that contained fund materials, which did not provide a sound basis for evaluating the facts and contained exaggerated claims.
Have you suffered losses in your Santander Investment Securities brokerage account? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against Santander Investment Securities stockbrokers who may have engaged in misconduct and caused investors losses.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

LPL FINANCIAL CENSURED AND FINED FOR FAULTY SUPERVISORY SYSTEMS GOVERNING DELIVERIES OF MUTUAL FUND PROSPECTUSES

LPL Financial LLC, a Boston, Massachusetts based brokerage firm, submitted a letter of acceptance, waiver, and consent to resolve Financial Industry Regulatory Authority (FINRA) findings that it failed to establish and maintain an adequate supervisory system and written supervisory procedures (WSPs) reasonably designed to ensure timely delivery of mutual fund prospectuses. FINRA's findings stated that the firm was required to provide each of its customers who purchased a mutual fund with a prospectus for that fund no later than three business days after the transaction. The firm executed approximately 16 million mutual fund purchase or exchange transactions, and several million of these transactions required the firm to deliver a mutual fund prospectus to the purchasing customer. Therefore, the firm was required to establish and maintain a supervisory system and WSPs reasonably designed to monitor and ensure the timely delivery of mutual fund prospectuses. FINRA censured and fined the firm a total of $400,000 for all violations committed.
A prospectus is a document that discloses important information about an investment. It typically provides investors with material information about mutual funds, stocks, bonds, and other investments. Such information generally includes a description of the company's business, financial statements, biographies of officers and directors, detailed information about their compensation, any litigation that is taking place, a list of material properties, and any other material information.
In addition, FINRA's findings stated that the firm relied on its brokers for the delivery of mutual fund prospectuses. Each broker was required to obtain the customer's signature on a prospectus receipt form to have a record of the delivery. However, the firm did not have a supervisory system in place that was reasonably designed to ensure that prospectus receipts had been obtained in connection with mutual fund purchases or that a prospectus had actually been delivered timely. The firm's WSPs did not require an adequate review of its brokers' performance of their prospectus delivery obligations. Instead, the firm's procedures consisted of inadequate measures. FINRA further stated that for some time, the firm was aware that its procedures were failing to ensure that brokers consistently obtained prospectus receipts or other evidence of mutual fund prospectus delivery. On at least two occasions, the firm contemplated proposals to adjust its procedures for tracking prospectus delivery compliance, but the firm did not modify or enhance its procedures and continued to rely upon brokers without adequate safeguards to ensure and monitor mutual fund prospectus delivery.
Have you suffered losses in your LPL Financial brokerage account? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against LPL Financial stockbrokers who may have engaged in misconduct and caused investors losses.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

LINCOLN FINANCIAL SECURITIES CORPORATION SANCTIONED DUE TO VARIOUS SECURITIES INDUSTRY LAWS VIOLATIONS

Lincoln Financial Securities Corporation, a Concord, New Hampshire based brokerage firm, has submitted a letter of acceptance, waiver, and consent in which the firm consented to over 16 Financial Industry Regulatory Authority's (FINRA) findings that it enacted a policy requiring its brokers to complete a variable redemption cover sheet (VRCS) for any variable annuity (VA) redemptions they sold, which included a section to document an economic analysis outlining the redemptions were beneficial to the customers and disclosing if the sale proceeds were intended to purchase a non-securities product. For over a year, the firm failed to ensure that brokers were completing the VRCS form when required to do so. Most of the forms were not completed, so the firm failed to review and supervise the VA redemptions that resulted in subsequent purchases of equity-indexed annuities (EIAs) and fixed annuities. FINRA's findings stated that the firm failed to enforce its supervisory system designed to ensure that recommendations to liquidate or surrender VAs to fund purchases of EIAs or fixed annuities were suitable, and thus failed to supervise these transactions. The firm was censured and fined a total of $525,000 for all violations committed.
FINRA also stated that the firm's written supervisory procedures (WSPs) prohibited its brokers from receiving commissions for securities transactions in customer accounts where the broker was not licensed in both the state of solicitation and the state in which the customer resided. The firm failed to detect around 2,500 transactions in customer accounts despite the fact that the brokers listed on the accounts were not licensed in the state in which the customer resided at the time of the commission payment. Nearly all of these transactions involved previously scheduled, recurring investments in established customer accounts. The findings included that the firm failed to enforce its policies and procedures designed to ensure that all of its brokers were properly licensed in the states where they conducted securities transactions for customers.
In addition, FINRA found that the firm failed to shape the transactional-monitoring aspect of its anti-money laundering (AML) procedures to its business. The firm failed to ensure adequate procedures were in place to watch for suspicious transactions that occurred in client accounts held directly with product manufacturers following the initial investment. The firm knew that subsequent transactions occurring in accounts held directly with product manufacturers were not undergoing AML monitoring by the firm because it was relying on the product manufacturers to review these transactions but did not confirm they were actually performing this review. FINRA also found that the firm's AML training program was inadequate in that it failed to adequately specify the time period for training employees and which employees required training. FINRA further determined that the firm required its brokers when communicating with customers to use a firm account or an outside email address linked to the firm account so all emails could be viewed and retained. However, the firm did not stop its brokers from using outside email addresses for non-securities related matters. Brokers who received securities-related emails through their outside email addresses were required to forward those emails to the firm's account. When an auditor reported that securities-related emails had not been forwarded, the firm failed to employ a system for confirming that its brokers were forwarding all securities-related emails for retention. The firm also failed to have an adequate system in place to confirm whether external email addresses were being used for securities-related correspondence and whether they were retained. FINRA concluded that the firm failed to reasonably enforce its supervisory procedures to ensure that all securities-related emails brokers sent or received were captured, reviewed, and stored.
Moreover, FINRA found that for over a year, the firm failed to reasonably supervise customer account activity and customer files for producing managers. The firm's WSPs permitted its OSJ managers to conduct reviews of their own securities transactions completed on behalf of customers. Firm branch office inspection reports did not ensure that a sufficient sample of the customer files reviewed during branch audits were accounts OSJ managers serviced.
Have you suffered losses in your Lincoln Financial Securities Corporation brokerage account? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against Lincoln Financial Securities Corporation stockbrokers who may have engaged in misconduct and caused investors losses.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

IMS SECURITIES CENSURED AND FINED DUE TO VARIOUS SECURITIES INDUSTRY VIOLATIONS

IMS Securities, a Houston, Texas based brokerage firm, has consented to Financial Industry Regulatory Authority (FINRA) findings that it registered a number of wholesale representatives, but did not shape its supervisory system to address its new wholesale business in a way that was reasonably designed to achieve compliance with applicable securities laws, regulations and FINRA rules. FINRA's findings stated that although supervising wholesale representatives was different than supervising retail representatives, the firm did not revise its written supervisory procedures (WSPs) or implement any procedures tailored to supervising the wholesale representatives until almost four years after hiring them. Also, FINRA's findings stated that the firm sold a wide range of securities products, including privately-traded real estate investment trusts (REITs) and direct participation plans (DPPs), but the firm did not have sufficient WSPs outlining its procedures for assessing them.
A REIT is a company that owns, and in many cases, operates income-producing real estate. REITs own properties ranging from office and apartment buildings to warehouses, hospitals, shopping centers, and hotels. Some REITs also engage in financing real estate. REITs were designed to provide a real estate investment structure similar to the structure mutual funds provide for investment in stocks.
A DPP is an investment opportunity that allows investors to participate in the profits and tax avoidance of some underlying business. Generally speaking, DPPs invest in real estate or energy products. The concept is to allow investors to participate in certain tax benefits usually available only to corporations, such as depreciation deductions. However, the United States government has curtailed many of the tax benefits available to DPPs. The investment will made up of shares of a partnership, an S corporation, a limited liability company, or any other entity that files an informational return with the IRS but does not itself have any taxable income or deductible losses.
In addition, FINRA's findings mentioned that IMS Securities failed to conduct annual audits at two of its OSJ branch offices one year. FINRA also found that the firm's wholesale representatives used external email addresses to send communications related to its securities business, and the firm failed to store these emails. Moreover, FINRA stated that for nearly two years, the firm failed to adequately maintain purchase/sales blotters and checks received/forwarded blotters, which lacked certain required information. Therefore, the firm failed to maintain blotters reporting a daily record of all purchases and sales of securities, all receipts and disbursements of cash, and all other debits and credits.
Have you suffered losses in your IMS Securities brokerage account? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against IMS Securities stockbrokers who may have engaged in misconduct and caused investors losses.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

E. S. FINANCIAL SERVICES CENSURED AND FINED FOR MISREPRESENTING COMMERCIAL PAPER PROGRAM

E.S. Financial Services, a brokerage firm based in Miami, Florida, submitted a letter of acceptance, waiver, and consent in which the firm consented to the entry of Financial Industry Regulatory Authority (FINRA) findings that it served as a placement agent and solicited certain non U.S. persons to invest in a commercial paper program offered by an affiliate outside the United States. At various times, in connection with the firm's sales of the commercial paper, the firm provided a customized document to each of the customers or prospective customers, in which the firm included the program in the cash portion of the customer's portfolio alongside U.S. Treasuries and other commercial paper products; labeled the program within investment options described as conservative; and described the main objective of investing in this category as a way to reduce global risk as well as to generate income. The findings stated that the firm recommended investing in the program over U.S. Treasuries or other commercial paper if the customer wanted a higher return. Contrary to the description of the program, it was neither a cash category investment, nor was it a conservative, low-risk investment. The firm was censured and fined $200,000 by FINRA.
Commercial paper is an unsecured, short-term debt instrument issued by a corporation, usually for the financing of accounts receivable, inventories, and meeting short-term liabilities. Maturities are typically less than 270 days, and the debt is usually issued at a discount, reflecting prevailing market interest rates. Commercial paper is not usually backed by any form of collateral, so only firms with high-quality debt ratings will find buyers without having to offer a substantial discount or higher interest rate. Commercial paper does not need to be registered with the Securities and Exchange Commission (SEC) as long as it matures before nine months (270 days), making it a very cost-effective means of financing. The proceeds from this type of financing can only be used on current assets and are not allowed to be used on fixed assets, such as a new plant, without SEC approval.
FINRA stated that E.S. Financial Services' representations amounted to false, exaggerated, or unwarranted statements in the investment program's materials. The findings also stated that the firm posted an information memorandum on a password-protected website accessible to customer that did not adequately detail certain risks associated with investing in the program. In addition, FINRA stated that the firm failed to conduct adequate due diligence relating to its sales of the commercial paper program, and failed to adopt, maintain and enforce adequate written supervisory procedures (WSPs) pertaining to its sale of the investments until almost four years after it began selling the investments. FINRA also included that the firm failed to adopt, maintain and enforce written due diligence procedures tailored to its sale of the investments. Although all of the investments were repaid on a timely basis at maturity, the firm's failure to implement written due diligence procedures led it to fail to conduct a reasonable investigation concerning various matter regarding the investments
Have you suffered losses in your E.S. Financial Services brokerage account? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against Deutsche Bank Securities stockbrokers who may have engaged in misconduct and caused investors losses.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.