The Financial Industry Regulatory Authority (FINRA) recently sanctioned brokerage firm Sigma Financial, for alleged supervisory failures. FINRA alleges that from April 2011 through June 2012, there existed supervisory deficiencies at Sigma, namely: the supervision of registered representatives, suitability processes and procedures, customer information procedures and branch office registration for trade execution.
Sigma’s supervisory and compliance functions were conducted by BD OPS, which also provided supervisory and compliance services for Sigma’s affiliated investment advisor and another broker-dealer.
FINRA found that 35 supervisory personnel were responsible for surveying some 1,274 registered representatives and 854 branch offices of Sigma. BD OPS, FINRA noted, only had three full-time staffers serving as field auditors during 2011 and 2012, which meant those staffers were responsible for conducting five to 10 branch inspections per week in order to meet obligations. This reliance on such a small number of supervisory personnel to survey such a large number of functions, FINRA found, was not reasonable.
FINRA found that Sigma Financial’s email review system was unreasonable as well. BD OPS again handled all email review for Sigma Financial representatives, as well as the other broker-dealer. However, there were no specified individuals assigned to conduct these reviews, and as a result, only a limited number of search terms were used to filter emails for possible review. Additionally, only 10 percent of identified emails contained words that FINRA considers red flags, such as “complaint,” “promise,” or “guarantee.”
This is not the first time Sigma Financial has been in troubled waters with FINRA. Back in 2013, “the firm improperly paid transaction-based compensation to the non-registered DBA entities registered representatives owned, rather than paying compensation, commissions, concessions or fees directly to the registered representatives who effected the securities transactions. The firm paid transaction-based compensation totaling $11,406,377 to nonregistered DBA entities for approximately two years.”
If you have suffered significant losses as a result of a brokerage firm’s failure to supervise a stockbroker or financial advisor, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact an investor rights attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or email@example.com for a no-cost, confidential consultation.