Murray Securities Inc., a securities broker dealer headquartered in Tyler, Texas, has been censured and fined $35,000.00 by Financial Industry Regulatory Authority (FINRA) because of non-compliance with regulations intended to protect investors. Letter of Acceptance, Waiver, and Consent No. 2021069350301 (April 8, 2024). The securities broker dealer was also ordered to undertake corrective measures by FINRA because it failed to meet the requirements of Regulation Best Interest (Reg BI).
According to the AWC, Murray Securities took an inadequate approach to supervising and ensuring compliance with Reg BI, a regulation designed to guarantee that brokers act in their customers’ best interests, prioritizing customer needs over their own financial or other interests.
Starting from June 30, 2020, when the regulation came into full effect, Murray Securities was obligated to implement a supervision system to monitor compliance with Reg BI. However, the securities broker dealer did not establish relevant procedures or policies related to Reg BI until October 2021—over a year after the deadline.
The implemented policies were vague and insufficient, lacking guidance on how to deal with conflicts of interest and ensuring the best interest of the customers during investment recommendations. These policies did not include certain steps to prevent financial or other interests of stockbrokers from overriding those of their customers, which is a requirement of Reg BI.
Additionally, the securities broker dealer did not address the Care Obligation under Reg BI. The Care Obligation requires brokers to use due diligence as part of concluding that their recommendations are in the best interests of the customer, considering investment costs and alternatives.
Also, since June 30, 2020, Murray Securities failed to implement a supervisory system and written supervisory procedures effectively designed to comply with Reg BI. Their written supervision procedures lacked clear guidelines on the necessary supervisory actions, including how often to conduct reviews, the documentation of these reviews, and the use of automated systems or exception reports for oversight.
FINRA found that Murray Securities violated FINRA Rules 2010 and 3110 and Securities Exchange Act Rule 15l-1(a)(1).
Murray Securities also failed to cooperate with the requirements of Form CRS (Customer Relationship Summary). Form CRS provides customers with information about the financial services offered, fees and costs involved, the standard of conduct to which stockbrokers are held, and any disciplinary history of the securities broker dealer or its financial professionals.
Murray Securities’ initial Form CRS lacked several mandatory disclosures, including discussions about potential conflicts of interests. Specifically, beginning in June 2020, Murray Securities left out essential details in its Form CRS. Although the firm added some missing information in the updated Form CRS filed on November 2021, it still lacked some mandatory details. Murray Securities’ Form CRS did not fully include conversation starters, including a required question relating to the stockbroker or firm’s disciplinary history and a required statement about how the securities broker dealer has to put the investor’s interests first. FINRA indicated that the omission of required information could prevent customers from understanding their rights and the potential risks involved in their interactions with the securities broker dealer.
Therefore, Murray Securities violated FINRA Rules 2010 and 3110 as well as Securities Exchange Act of 1934 Section 17(a)(1) and Rule 17a-14.
