Dougherty & Company LLC, headquartered in Minneapolis, Minnesota, has been censured and fined $140,000.00 by Financial Industry Regulatory Authority (FINRA) based upon consenting to findings that the firm failed to supervise a registered representative who effected unsuitable and unauthorized investment transactions. Letter of Acceptance, Waiver and Consent, No. 2015047008701 (Nov. 28, 2016).
According to the AWC, between 2010 and 2014, a registered representative of Dougherty & Company LLC effected hundreds of trades in the accounts of two elderly customers even though the representative never contacted the customers prior to placing the trades. The AWC reported that the Dougherty registered representative also made recommendations concerning investment strategies that were not suitable for customers, and which consisted of repeatedly utilizing margin on unnecessary occasions as well as trading municipal and corporate bonds on a short-term basis.
The AWC revealed that the firm failed to provide reasonable supervision of the trading activity taking place by the registered representative. Apparently, supervisory responsibility was assigned by the firm to a supervisor; however, the supervisor was tasked with his own accounts to manage and was additionally responsible for overseeing the conduct of several of the firm’s registered representatives.
The AWC additionally stated that the firm’s supervision systems and procedures were inadequately designed and not capable of identifying the misconduct of the registered representative. Particularly, the firm did not utilize exception reports which accounted for use of margin or trading on a short-term basis. Moreover, accounts owned by trusts were not assessed by the firm’s exception reports, which led the trading activity by the registered representative in the trust owned account to go unnoticed.
Dougherty reportedly failed to take into account other red flags pertaining to the registered representative, which included the fact that the commissions earned by the registered representative between 2011 and 2013 had increased substantially, even though accounts managed by the registered representative and products that he sold did not increase proportionately.
FINRA found that the Dougherty’s supervisory procedures and systems were inadequately geared to detect and prevent securities violations pertaining to unsuitable investment recommendations and customer trading authorizations. Accordingly, FINRA found Dougherty’s conduct to be violative of FINRA Rules 2010, MSRB Rule G-27(a), and NASD Rule 3010(a).
FINRA Public Disclosure reveals that since 1977, Dougherty & Company LLC has thirty-five disclosure events which consist of twenty-three regulatory actions and twelve customer initiated investment related arbitration claims.
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