If you ever wonder whether all the rules and policies really matter, they DO! Let's look at some recent FINRA enforcement cases:
- Client Data related:An individual was fined $20,000 and suspended for 6 months for downloading from his member firm’s computer systems confidential information that constituted nonpublic personal customer information and sent the customer data to two non-firm email addresses that he controlled. The individual had received an employment offer from another firm, then downloaded files from his firm’s databases containing customer names, social security numbers, phone numbers, addresses, birth dates, account numbers, and account values for customers. The individual did not inform his current Firm/Broker-Dealer that he was taking the information, and he did not give the customers notice and opportunity to prevent the transfer of their information.
- Trades in account of senior customer with diminished capacity: An individual was fined $12,500, suspended for three months, and ordered to pay deferred disgorgement of compensation received in the amount of $10,760.88. The rep had effected unauthorized trades in the account of a senior customer with diminished capacity. In addition, the rep was set up as a co-power of attorney without the Firm’s approval.
- Exercising Discretion: An individual was fined $5,000 and suspended for 30 days for exercising discretion when placing trades in six brokerage accounts held by four customers, three of whom were seniors, without prior written authorization from the customers. The rep had discussed investment strategy with the customers but had not received authorization to exercise discretion.
- Private Securities Transaction/Off-Channel Communications: An individual was barred for participating in 74 private securities transactions without providing prior written notice to, or receiving written approval from, his member Firm. The transactions involved different securities and 27 individuals, most of which were customers of the Firm/Broker-Dealer. The individual exchanged over 2,250 communications with colleagues, firm customers, other investors, and partners using his private email addresses, text messages sent/received through his private mobile phone, and other online platforms (not retained/reviewed by the Firm/ Broker-Dealer).
- Complaint Resolution related: An individual was barred for paying a customer from his personal bank account in what appeared to be an attempt to avoid a customer complaint, engaged in an undisclosed and unapproved OBA, and did not provide factual responses when asked about his actions and activities.
Please contact the Prosperity Network Compliance Team with any questions:
compliance@prosperityadvisors.com or 913-529-5500 Option 2.
Internal Use Only
Attachment:FINRA Monthly Disciplinary Actions May 2025