Cetera Financial Specialists LLC a broker-dealer headquartered in Schaumburg Illinois has been censured and fined $200,000.00 by Financial Industry Regulatory Authority (FINRA) based upon consenting to findings that it failed to supervise outside business activities pursued by its staff. Letter of Acceptance Waiver and Consent No. 2015045233601 (July 9, 2018).
According to the AWC, from January of 2012 to December of 2014, the firm failed to adequately supervise registered representative Alex P. Anderson, who was listed as a power of attorney on accounts owned by two elderly customers, LZ and LF. Apparently, Anderson was designated as a beneficiary of the estate of LZ. The AWC stated that Anderson was provided with the authorization to, inter alia, effect withdrawals from LZ’s and LF’s investment accounts.
The AWC revealed that Anderson was barred from associating with any FINRA member in any capacity based upon his consent to findings that he mishandled $75,000.00 from a retail bank account owned by LZ and used LZ’s funds for Anderson’s benefit; conduct violative of FINRA Rules 2010 and 2510. Letter of Acceptance Waiver and Consent No. 2014043846601 (Apr. 22, 2015).
Evidently, on three occasions between January of 2012 and December of 2014, Anderson informed Cetera Financial Specialists about his outside business activities pertaining to the customers. Particularly, Anderson informed the firm that he was power of attorney for both LZ and LF, wherein he provided those customers with help pertaining to their real estate transactions, investments and payments of bills and taxes.
The AWC revealed that during the time that Anderson acted as LZ’s and LF’s power of attorney, written procedures utilized by the firm disallowed registered representatives from being a fiduciary for customers when those customers were not part of the registered representative’s family. Moreover, the written supervisory procedures of the firm tasked supervisory personnel with both monitoring registered representatives’ requests to engage in outside business activities and determining the extent in which outside business activities presented possible business conflicts. Apparently, the firm failed to examine or take any action concerning the outside business activity disclosures reported by Anderson.
In particular, the AWC stated that the firm failed to examine transactions placed by Anderson on LZ’s behalf until the issuer of a mutual fund suspected that Anderson’s activities were problematic and voiced concerns in September of 2014 with Cetera. The AWC stated that Anderson’s registration with the firm had been terminated in December of 2014 based upon accusations that Anderson failed to be forthcoming in the firm’s investigation into the nature of his withdrawals from LZ’s accounts.
The AWC further revealed that in October of 2013, the firm called upon its registered representatives to apprise the firm of the representatives’ designations as executors, powers of attorney and trustees. Yet, when two hundred disclosures had been made by its registered representatives, the firm decided to temporarily halt its supervisory review. FINRA found that the firm’s failure to review outside business activities was violative of FINRA Rules 2010, 3270, 3110 and National Association of Securities Dealers (NASD) Rule 3010.
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