If you're going to promise a Wall Street regulator that you will fix a problem, you better make certain -- in fact, you better make damn certain -- that you fix whatever the problem is. Few things are more certain in life then a regulator doubling down on someone or something that it regulates when a promise is not kept. Consider this recent case where a firm agreed to enhance its protocol for notifying customers of wiring funds to third parties.
Case In Point
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Scottrade, Inc. submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Scottrade, Inc., Respondent (AWC # 2013035000501, June 22, 2015).
Since 1980, Scottrade, Inc. has been a FINRA member firm and now operates primarily as an online broker-dealer with about 2,000 registered representatives through 500 branches. The AWC asserts that Scottrade "had not been the subject of any formal FINRA disciplinary actions that are relevant to this matter."
SIDE BAR: Now that's a new one. Usually, FINRA provides the prior disciplinary history, if any. In this case, however, we are advised by the AWC that there are no prior "formal" FINRA disciplinary actions that are "relevant" to this matter. Which raises a few questions. First, what's an "informal" FINRA disciplinary action, and are such disclosed? Two, what is the basis of determining whether a prior matter is "relevant" to current matter and who makes that determination at FINRA? Frankly, when negotiating settlements for my clients, I would like to seek the "informal" resolutions that will be deemed "not relevant" to any subsequent ones.
The AWC asserts that in 2011, FINRA had cautioned that the firm had not established a system reasonably designed to notify customers of third party wires of $500,000 or less, and to document such notification. In response to the self-regulator's warning, Scottrade purportedly committed to implementing an automated system to notify customers of wire transfers from customers' accounts to third party accounts by means of emails generated from Scottrade's home office.
You Wuz Warned!
The AWC alleges that notwithstanding the 2011 warning and the firm's commitment to revise its customer notification process, Scottrade did not change any of its procedures or processes for notifying customers of third party wires from their accounts until October 21. 2013.
Accordingly, the AWC alleges that from October 3.2011 through October 21.2013, Scottrade maintained a supervisory system and supervisory controls that were not reasonably designed to notify customers of third party wires of $500,000 or less and to document such notification.
SIDE BAR: From October 3. 2011 through July 31. 2013. Scottrade processed 17.413 third party wires in the aggregate amount of$883,944.371.
With respect to third party wires:
FINRA deemed that Scottrade either failed to obtain customer confirmation, or failed to obtain customer confirmation in violation of NASD Rules 3010(a) and 3012, and FINRA Rule 2010.
Trade Processing - Includes reviewing all paperwork for accuracy & suitability, providing necessary follow-up, etc.
Assist both the Compliance & Advertising Review Departments as needed.
Other duties as assigned.
1-2 years broker/dealer compliance background preferably focused on review and approval of accounts and trades.
Series 6, 63 & 26 required or a combination of the Series 7, 63/66 & 24.
California life license with variable line.
Proficiency in common desktop applications.
Must possess excellent customer service and communication skills - written and verbal.
Ability to multi-task and assist other departments while remaining flexible in an ever-growing environment.
Salary commensurate with experience.
Excellent benefits package including dental, vision, medical, etc.