Capital City Securities, LLC, a brokerage firm headquartered in Columbus, Ohio, has been censured and fined $15,000.00 from by Financial Industry Regulatory Authority (FINRA) by way of the firm’s consent to findings that the firm failed to supervise sales of exchange traded funds. Letter of Acceptance, Waiver and Consent, No. 2014039216101 (Dec. 5, 2017).
According to the AWC, between July of 2011 and November of 2014, the firm failed to create and implement an adequate system of supervision geared towards making sure that the sales of inverse and leveraged exchange traded funds were in compliance with FINRA and NASD Rules. Particularly, ten of the firm’s stockbrokers effected sales of the inverse and leveraged exchange traded funds in five hundred transactions.
The AWC stated that the firm did not adequately supervise sales by its representatives. Evidently, no written procedures were set in place for the firm to identify the risks and features that pertained to non-traditional exchange traded funds. Further, Capital City Securities reportedly failed to utilize surveillance tools or exception reports for purposes of addressing the length of time that the non-traditional exchange traded funds were held in customer accounts. Consequently, customers held positions for extended periods, which exposed them to additional risks of loss.
FINRA found that the firm failed to supervise non-traditional exchange traded fund sales effected by its stockbrokers to ensure that they complied with industry rules and securities laws; conduct violative of FINRA Rules 2010 and NASD Rule 3010.
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