Boenning & Scattergood, Inc., headquartered in West Conshohocken, Pennsylvania, was fined $100,000.00 and censured for, inter alia, failing to adequately supervise private securities transactions as well as consolidates reports. Letter of Acceptance, Waiver and Consent, No. 2014038906401 (Aug. 24, 2016).
According to the AWC, between April 25, 2011, and March 13, 2014, a registered representative that worked for Boenning & Scattergood, Inc. ran a registered investment advisory in which some of the RIA’s customers held their accounts at other broker-dealers than Boenning & Scattergood, Inc. Apparently, this RIA was made known to Boenning & Scattergood, Inc. and received approval to operate as an outside business activity.
The AWC stated that the registered representative had effected private securities transactions for RIA customers and received consideration for doing so, in some cases on behalf of RIA customers who were customers of Boenning & Scattergood, Inc. In such cases; however, Boenning & Scattergood, Inc. never recorded the transactions within the firm’s business records and books, and failed to supervise them.
FINRA stated that Boenning & Scattergood, Inc.’s written supervisory practices did not account for how private securities transactions would be approved, nor did they address how such transactions would be supervised. FINRA found that Boenning & Scattergood, Inc. violated FINRA Rule 2010 as well as NASD Rules 3010 and 3040 as a result.
The AWC further stated that one of the firms’ representatives submitted 120 consolidated reports to customers, in which customers’ in-house and outside assets were listed, withdrawals were identified, and investment return information was provided. However, FINRA found that such reports did not contain the sources for outside asset information, nor were the copies of such reports retained by the firm.
FINRA claimed that Boenning & Scattergood, Inc. did not have written supervisory procedures which pertained to consolidated reports, as required. Further, the AWC stated that there were no mechanisms used by the firm in order to identify when representatives were utilizing consolidated reports, and protocols to determine whether information provided to investors was inaccurate. Additionally, FINRA claimed that the firm did not review reports that were sent during the timeframe of April 25, 2011, through March 13, 2014.
FINRA found that the firm’s supervisory failures in this regard were violative of FINRA Rules 2010 and NASD Rule 3010. FINRA also found that the firm’s failure to keep consolidated reports that were transmitted to customers was conduct violative of Securities Exchange Act of 1934 Section 17, SEC Rule 17a-4, as well as FINRA Rules 4511 and NASD Rule 3110.
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