Griffinest Asia Securities LLC a securities broker dealer located in Pasadena California has been censured and fined $35,000.00 by Financial Industry Regulatory Authority (FINRA) based upon allegations that it failed to supervise the sales of non-traditional exchange traded products which had been initiated by stockbrokers of Griffinest Asia. Letter of Acceptance Waiver and Consent No. 2019062326101 (Sept. 17, 2020).
According to the AWC, from July of 2016 to November of 2018, Griffinest Asia neglected to create and implement adequate written supervisory procedures and supervision systems with a view towards ensuring the suitability of non-traditional exchange traded products. The securities broker dealer did not take appropriate steps to ensure that transactions complied with FINRA rules as well as securities regulations and laws.
The AWC stated that there were no written supervisory procedures and supervision systems regarding the suitability of non-traditional exchange traded product trades. The securities broker dealer failed to put in place any mechanism for monitoring the risks associated with those products including the risks of holding them on a long-term basis given these products’ daily reset features.
Griffinest Asia supervisors were mandated under the written supervisory procedures to undertake suitability assessments of products when they were purchased. But there were no procedures or systems which served to train or otherwise apprise supervisory personnel on exactly how they would ensure that the recommendations of these alternative investments were appropriate for customers given the risks and features of these products.
The procedures and system used by Griffinest Asia also fell short of detecting when there were prolonged holding periods of the non-traditional ETPs. Exception reports or alert systems could have potentially identified these prolonged periods but those reports or alert systems were not used by the securities broker dealer.
FINRA also alleged that stockbrokers were not provided with adequate training in regard to the non-traditional exchange traded products before they initiated transactions in the accounts of retail customers. There was no training provided to principals regarding these products either. This precluded principals from undertaking proper supervisory reviews for the suitability of transactions before approval. Customers sustained losses of $86,185.65 because of these supervisory failures. FINRA determined that Griffinest Asia violated FINRA Rules 2010, 3110(a) and 3110(b).