Securities Lawyers Blog
The Financial Industry Regulatory Authority (FINRA) recently brought a complaint against brokerage firm Randor Research & Trading Company (Randor) and registered representatives William Scholander (Scholander) and Talman Harris (Harris) alleging that between February 2011, through March 2013, Radnor displayed a pattern of disregard of its supervisory obligations concerning reporting, disclosure, and compliance responsibilities. FINRA alleged that this disregard included the firm’s failure to report customer complaints, failure to update a registered representative’s Form U4 and failure to ensure that material information was disclosed to customers, and to maintain and enforce adequate supervisory systems and written procedures.
Radnor has been a member of FINRA since 2004, is based in the Philadelphia area and had one branch office in New York. The firm has 17 registered persons working in the two branches. Scholander has been registered with 13 different firms since 1998. Harris has been registered with 16 different firms since 1998. Harris was the branch manager of the New York office during the period.
FINRA alleged that in late 2011, Radnor failed to report two customer complaints made against its brokers. One customer claimed that certain trades were unauthorized and made a demand for damages. According to FINRA, another potential customer claimed that a broker of the firm had participated in unethical or illegal behavior possibly market manipulation. Despite those claims, FINRA claimed that Radnor chose not to report the complaints as required by FINRA rules. FINRA also alleged that Radnor also chose not to report the unauthorized trade complaint on the Form U4 of Scholander and Scholander knowingly failed to ensure that his Form U4 was timely updated to reflect the complaint. As a result, FINRA alleged that both Radnor and Scholander willfully violated the FINRA rules.
FINRA next alleged that Radnor did not have adequate written procedures and failed to implement a supervisory system with regard to customer complaint reporting and Form U4 disclosure. FINRA alleged that Harris, a registered principal, took action which prevented compliance personnel in the firm’s home office from reviewing the complaint against Scholander. FINRA claimed that even after firm compliance personnel became aware of the complaint Radnor still failed to take appropriate action.
FINRA also allege that Radnor failed to meet its supervisory responsibilities with regard to markup/markdown disclosures to customers and canceled trades. FINRA also alleged that between July 2011 and January 2012, Radnor conducted two private placements of Nova. However, FINRA alleged that Radnor’s written procedures did not describe any required activity with regard to due diligence to be done related to private placements. The procedures also allegedly failed to indicate what firm principals or other employees were to accomplish specific tasks or responsibilities regarding due diligence.
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