First Financial Equity Corporation, headquartered in Scottsdale, Arizona, was censured and fined $230,000.00 by Financial Industry Regulatory Authority (FINRA) Department of Enforcement according to an Office of Hearing Officers’ Order Accepting Offer of Settlement containing findings that the firm failed to supervise key aspects of the firm’s operations, which included the commissions charged by the firm’s staff. Department of Enforcement v. First Financial Equity Corporation, et al., No. 2013034966701 (Dec. 30, 2016).
According to the Order, the firm failed to supervise the fees that customers paid to invest through the firm. The Order stated that there were no supervisory procedures put in place which allowed the firm to adequately confirm that fees were appropriately charged. The firm reportedly did not have a way to detect situations in which fees had been excessively charged.
The Order additionally stated that the firm had not properly supervised the firm customers’ account based activity. Particularly, the firm failed to set forth supervisory measures and protocols which pertained to the firm’s options business. FINRA held that the firm’s supervisory failures in this regard were violative of FINRA Rules 2360, 2010, and NASD Rules 3010(a) and (b).
The Order further stated that First Financial Equity Corporation did not adequately confirm that investments sold to investors were suitable. The firm reportedly failed to effectuate written procedures concerning supervision of exchange traded funds sales. FINRA found that the firm’s conduct in this regard was violative of FINRA Rules 2111 and Rule 3010.
FINRA also noted that the firm did not properly administer written supervisory procedures regarding excessive trading and churning reviews, as well as reviews of accounts listed as discretionary. FINRA found that the firm’s conduct in this regard was violative of FINRA Rule 2010 and NASD Rule 3010(b).
Additionally, the Order stated that from July 2012 through April 2013, due to FFEC’s supervisory failures, a firm representative, JW, charged excessive commissions in customer accounts. The Order indicated that the firm did not respond appropriately after becoming apprised of the red flags regarding the excessive commissions which had been charged by JW.
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