Steve Hinkle of Englewood, Colorado, was fined $10,000 and suspended for twenty days from association with any Financial Industry Regulatory Authority (FINRA) member in all principal capacities after consenting to findings that he failed to supervise procedures associated with detecting and preventing excessive and unsuitable trading. Letter of Acceptance, Waiver and Consent, No. 2014038969301 (Jan. 12, 2016).
According to the AWC, from September 2012 through February 2014, Hinkle failed to supervise several aspects of his business. Throughout this time, Hinkle was Dynasty’s president and chief compliance officer. Hinkle reportedly failed to institute and manage supervisory procedures and systems pertaining to the review of trades. The firm reportedly had a procedure to have its chief compliance officer review accounts containing high levels of active trading and implement a protective measure to ensure that such active trading was in line with the customer’s investment goals.
The AWC noted that the firm’s procedures to detect excessive trading and churning were inadequate, in that they failed to identify the proper channels to determine when trading was deemed excessive. The firm reportedly had no process where a customer’s annual turnover rate or cost/equity ratios would be analyzed in this regard. The AWC stated that Hinkle failed to use exception reports and/or demonstrate any periodic review of the firm’s customer accounts to aid in detecting such excessive and/or unsuitable trading. Hinkle’s procedures for communicating with customers was also found to be defective and inadequate.
The AWC identified Hinkle’s failure to supervise a stockbroker, Raymond Clark, despite Hinkle’s awareness of red flags pertaining to Clark’s conduct on the job – which FINRA claimed should have led Hinkle to engage in a greater level of scrutiny of Clark as a result. For example, in July 2011, Hinkle identified Clark’s high turnover rates and frequent trading in customer accounts, prompting him to implement a procedure to review Clark’s accounts on a quarterly basis, make direct contact with customers, and send written correspondence to ensure that the firm’s clients were happy. The AWC stated that Hinkle failed abide by such procedures in this regard.
Raymond Thomas Clark operated his own office for Dynasty Capital Partners in Buffalo, New York. In November 2015, Clark for failure to pay a fine in connection with a FINRA Enforcement Action against him, finding that Clark engaged in a host of wrongful activities, Clark was barred by FINRA. As of even date, according to FINRA Public Disclosure Records, Clark has been subject to at least 16 customer initiated investment related complaints alleging fraud and excessive trading or the churing of customer accounts.
The AWC indicated that an estimated seven accounts, between August 2012 and April 2014, were apparently excessively traded by Clark. These accounts, according to the AWC, contained cost/equity ratios of 36.1% to 113.8%; commission/equity ratios of 31.9% – 109.7%, and annualized turnover from 6.9 to 25.8. Hinkle reportedly failed to correspond with such customers as planned, and had additionally not reported two complaints from customers of Clark. FINRA found that Hinkle’s supervisory failures regarding Clark resulted in customer losses via sales practice violations or excessive trading. As such, Hinkle was found by FINRA to have violated NASD Rule 3010 and FINRA Rule 2010.
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