Securities Lawyers Blog
This post continues our prior report on the Financial Industry Regulatory Authority’s (FINRA) recently sanctions against Sigma Financial Corporation (Sigma Financial) alleging from April 25, 2011, through June 24, 2012, supervisory deficiencies existed at Sigma including the firm’s supervision of registered representatives, the firm’s suitability processes and procedures, some of the firm’s implemented procedures relating to customer information, and also branch office registration for trade execution.
FINRA found that Sigma Financial permitted its representatives to create and use consolidated statements with their customers that reflected the customers’ holdings of investments away from the firm. However, FINRA found that Sigma Financial did not adequately supervise its representatives’ creation and use of such statements in that the firm neither centrally tracked the number or identity of representatives who were using consolidated statements nor the customers who received such statements. Instead, FINRA found that Sigma Financial relied upon the representatives themselves to submit only the initial template of the consolidated statements they created and intended to use with their customers and the firm did not actually receive or review the statements shared with the customers.
Another supervisory deficiency noted by FINRA was that Sigma Financial had four preferred vendors through which brokers could establish and maintain websites. But use of these vendors, was not required and FINRA found that 134 representatives maintained non-preferred vendor websites, or approximately 20% of all websites. FINRA found that non- preferred vendors failed to notify Sigma Financial if registered representatives made any changes to their websites. In this way FINRA found that Sigma Financial did not conduct adequate supervision of those non-preferred vendor websites.