NFP Advisor Services, a FINRA member firm since 1997 headquartered in Austin, TX, conducts general securities business via 1,924 registered individuals and 673 branch offices. The firm, in proposing settlement of rule violations alleged by FINRA without admitting or denying the findings, consented to a FINRA censure and fine of $500,000 in connection with failing to abide by several regulatory obligations related to its supervision of registered representatives. FINRA Letter of Acceptance, Waiver and Consent No. 2011025618702 (July 16, 2015). FINRA accepted the AWC from NFP Advisor Services, LLC (f/k/a/ NFP Securities Inc.) prior to any regulatory hearing and adjudication regarding the matters.
According to the FINRA Letter of Acceptance, Waiver and Consent (AWC), from December 2006 through January 2014, NFP Advisor Services, LLC failed to commit the necessary time, attention, and resources to several critical regulatory obligations related to its supervision of registered representatives. The supervisory failures indicated in the AWC include the failure to supervise the private securities transactions of 79 representatives who were dually registered with Registered Investment Advisors (RIAs), failure to preserve securities-related emails sent and received by five of its registered representatives, failure to approve and preserve advertising materials contained on three websites that were maintained by one of its registered representatives and failure to timely update the forms U4 of its registered representatives on 81 occasions.
FINRA found that NFP violated FINRA By-Laws Article V, Section 2, FINRA Rules 1122, 2010 (for conduct on and after December 15, 2008) and 4511 (for conduct on and after December 5, 2011), NASD Rules 2110 (for conduct before December 15, 2008), 2210(b), 3010(a), 3040(c)(2), and 3110 (for conduct before December 5, 2011) and Section 17(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 17a-4 promulgated thereunder. FINRA censured and fined NFP $500,000.
NFP Failed to Investigate Red Flags
Regarding the private securities transactions, the AWC indicated that NFP failed to investigate red flags or follow-up on one of their registered representative’s 2009 disclosure of managing an investment fund as an outside business activity in order to ascertain the representative’s participation in private securities transactions that NFP would then be responsible for supervising.
The AWC also indicated that NFP failed to supervise advisory activity of 79 registered representatives who were dually registered with NFP and fourteen Registered Investment Advisors. The RIA’s had $3+ billion in assets under management, some of which was held under management of the 79 registered reps. The reps handled securities transactions on behalf of their RIA clients by placing orders with the broker-dealers that carried the accounts of their RIA clients. The AWC alleges that NFP failed to discern the activities as private securities transactions rather than outside business activities, in turn resulting in NFP’s failure to comply with supervision and recordkeeping requirements of the reps’ participation in the transactions as if executed on behalf of NFP per NASD Rule 3040(c)(2).
Public Disclosure Records Reveal Not the First Time
This is not the first time that NFP has been subject to censured and fined by FINRA for misconduct. Public disclosure records reveal that on June 20, 2012, NFP was censured and fined $43,121.39 for violations of NASD Rules 2110, 2440, and 3010 in connection with charging excessive markups on several riskless principal corporate bond transactions in the account of a customer. FINRA Letter of Acceptance, Waiver and Consent No. 2009016273001 (June 20, 2012).
In April 2011, NFP was censured and fined $50,000 for violations of NASD Rules 2110, 2210(b), 2210(d) and 3010 in connection with approving advertising materials used by a registered rep in his retail equity indexed annuity (“EIA”) business and senior investor seminars where such materials contained false, exaggerated, unwarranted or misleading statements. FINRA Letter of Acceptance, Waiver, and Consent No. 2007011393902 (Apr. 6, 2011). NFP allegedly failed to document a principal’s approval of advertising material used by the rep, supervise the rep’s seminars, require him to produce a copy of the script he used for the seminars, or even attend seminars to ensure compliance with NASD Rules.
In summary, public disclosure records reveal that NFP has been subject to a total of 4 investment related arbitration events resulting in damages awards, with allegations including breach of fiduciary duty, breach of contract, failure to supervise, account-related negligence. Records also reveal that the Firm was subject to a total of 8 regulatory events resulting in censure and fines.
Investors suffering losses caused by NFP’s aforementioned misconduct in connection with their securities business may be able to recover their investment losses.
Guiliano Law Group
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