GWN Securities Inc. is a brokerage firm headquartered in Palm Beach Gardens Florida that has been censured and fined one hundred thousand dollars by Financial Industry Regulatory Authority (FINRA) based upon consenting to findings that the firm failed to supervise its unit investment trust business to ensure that customers were provided with discounts when eligible and failed to implement an adequate supervisory system to detect and prevent inappropriate variable annuity exchanges. Letter of Acceptance Waiver and Consent No. 2016047566601 (Feb. 20 2018).
According to the AWC, from March 1, 2011 to February 29, 2016, the firm failed to detect and apply discounts on sales charges for customers purchasing unit investment trusts who were eligible. Apparently, the firm neglected to apply discounts on three hundred forty transactions involving purchases of unit investment trusts, which led customers to collectively pay $72,715.82 more in sales charges than they should have. FINRA found that the firm’s failure to detect and apply unit investment trust sales charge discounts was violative of FINRA Rule 2010.
The AWC additionally stated that from March 1, 2011 to February 29, 2016, the firm neglected to create and implement supervision systems and written supervisory procedures that were adequately geared to make sure that customers obtained discounts on sales charges when purchasing unit investment trusts. Apparently, GWN’s written supervisory procedures failed to set forth the appropriate guidance on calculating and applying discounts for purchases of unit investment trusts and failed to address the discounts pertaining to rollovers.
Moreover, the firm reportedly failed to assess the extent of unit investment trust trades being effected on a short-term basis. The AWC revealed that short-term trading of unit investment trusts had been recommended by at least one of the firm’s stockbrokers.
The AWC also indicated that between August 30, 2014 and February 29, 2016, GWN failed to create and implement supervision systems and written supervisory procedures geared to detect and assess if variable annuity exchanges had been effected by the firm’s registered representatives at an unsuitable rate. Apparently, several representatives of the firm effected variable annuity exchanges at an unusually high rate.
Evidently, the suitability of representatives’ variable annuity exchange transactions had only been monitored by the firm on a manual basis for purposes of assessing suitability. The AWC stated that the firm only engaged in a look-back period of one month to assess variable annuity transactions but failed to document that a review of the transactions actually took place. The firm additionally neglected to implement any surveillance measures to determine registered representatives’ high exchange rates and possessed no procedures or systems for housing its variable annuity exchange rate history. FINRA found that the firm’s conduct was violative of FINRA Rules 2010, 3110 and 2330(d) as well as National Association of Securities Dealers (NASD) Conduct Rule 3010.
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