IMS Securities, Inc., of Houston, Texas, was censured and fined $100,000.00 by Financial Industry Regulatory Authority (FINRA) after consenting to findings that the firm failed to supervise aspects of its variable annuity business. Letter of Acceptance, Waiver and Consent, No. 2014039417401 (Sept. 30, 2016).
According to the AWC, between July 15, 2013 and May 8, 2014, IMS did not have reasonable supervisory protocols and procedures geared to detect when rates of variable annuity exchange transactions raised red flags. Particularly, IMS’ chief financial officer is who the firm depended on to determine when 1035 Exchange transactions were compliant; however, he was not given any proper training in this regard.
FINRA noted that trend analysis or exception reports, which are tools typically utilized in determining problematic rates of exchange, were never provided to the chief financial officer. Rather, the chief executive officer merely utilized customer’s order records and applications pertaining to variable annuities in order to make such determinations. The AWC stated that the firm’s supervisory failures prevented it from detecting patterns of annuity exchanges that were possibly problematic and out of compliance. As such, FINRA cited the firm for violating NASD Rule 3010(a), 3010(b), as well as FINRA Rules 2010 and 2330(d).
The AWC further stated that the firm did not properly enforce supervisory procedures and protocols pertaining to the dissemination of consolidated reports to customers. Apparently, these reports raised concerns from FINRA due to inaccuracies and misleading information pertaining to customer’s assets, and led FINRA to warn firms, like IMS, regarding the precautionary measures required from a supervisory level to ensure proper review and approval of the reports.
The AWC stated that the firm’s procedures indicated that consolidated reports were to be reviewed and approved. Specifically, the firm’s process for approving such reports called for the value of customer’s assets held away from the firm to be verified. Apparently, the firm did not properly engage in the review and approval of such values prior to customers being sent such reports.
FINRA noted in one case, between April 1, 2014, and June 30, 2014, sixty-six reports were transmitted by ten of the firm’s registered representatives, in which the values of customers’ outside assets were only verified after the reports were sent to customers. FINRA found that the firm’s conduct of failing to abide by its supervisory procedures pertaining to consolidated reports was violative of NASD Rules 3010(a), 3010(b), and FINRA Rule 2010.
This is not the first time that IMS Securities has been sanctioned for misconduct for supervisory mishaps. Particularly, the firm was previously censured and fined $100,000.00 by FINRA after consenting to findings that the firm did not effect and maintain a supervision system in order to properly supervise registered representatives dealing with wholesale transactions. Letter of Acceptance, Waiver and Consent, No. 2010020847501 (Dec. 2012). The firm was found by FINRA to have violated FINRA Rules 2010, NASD Rules 3010, 3110 and 2110, as well as Securities and Exchange Rules 17a-3(a)(1) and 17a-4(b)(4).
Additionally, the firm was reprimanded and fined $20,000.00 by Texas State Securities Board in connection with findings that the firm violated Texas Securities Board Rules and Regulations’ Section 115.10(b)(1) for not properly enforcing written supervisory procedures pertaining to inspection of branch offices and heightened supervision of registered representatives. No. IC12-CAF-20 (Nov. 16, 2012).
The information contained herein has been obtained from reliable sources however may not be accurate and is not guaranteed by us. Readers are encouraged to undertake their own independent investigation and evaluation of the relevant facts. All claims and allegations are subject to adjudication, decisions may be subject to appeal, and no inference is intended, nor should any inference be made from any information contained herein from any source.
This posting and the information on our website is for general information purposes only. This content should be not considered legal advice, and any responses, comments, e-mails, other communications do not form any attorney client relationship. Attorney Advertisement. See Important Disclaimer
Guiliano Law Group
Our practice is limited to the representation of investors. We accept representation on a contingent fee basis, meaning there is no cost to you unless we make a recovery for you. There is never any charge for a consultation or an evaluation of your claim. For more information, contact us at (877) SEC-ATTY.
For more information concerning common claims against stockbrokers and investment professionals, please visit us at securitiesarbitrations.com
To learn more about FINRA Securities Arbitration, and the legal process, please visit us at securitiesarbitrations.com
