Parkland Securities LLC a stockbrokerage firm headquartered in Ann Arbor Michigan has been censured and fined $20,000.00 by Financial Industry Regulatory Authority (FINRA) based upon the firm’s consent to findings that it failed to create and implement a supervision system pertaining to non-traditional exchange traded fund transactions. Letter of Acceptance Waiver and Consent No. 2016052300601 (Mar. 7, 2019).
According to the AWC, written supervisory procedures utilized by the firm mandated a product manager’s approval on non-traditional exchange traded fund transactions executed by the stockbrokers in customers’ investment accounts. The AWC stated that the suitability of non-traditional exchange traded fund transactions for the firm’s customers had to be assessed by the product manager, and the materials utilized by the firm’s stockstockbrokers concerning non-traditional exchange traded funds were supposed to be examined by the product manager.
The AWC stated that there were no written materials designed by the firm for stockbrokers to be trained on when the exchange traded fund transactions were appropriate for the customers. Moreover, the AWC stated that the firm’s stockbrokers did not receive any sufficient trainings in reference to the features and risks of those alternative investments.
The AWC further stated that there was an inadequate system or set of procedures utilized by the firm to identify when the non-traditional exchange traded fund trades were not suitable for customers. Evidently, there were no procedures or exception reports maintained by the firm for purposes of examining the periods of time that non-traditional exchange traded funds were held in the customers’ accounts.
Seemingly, the general daily blotter that the firm utilized served as the sole mechanism by which the alternative investment transactions had been monitored. Customers of the firm ultimately held the non-traditional exchange traded funds in their accounts for prolonged periods. Also, the AWC stated that there were no red flags raised in the supervision systems utilized by the firm concerning those extended holding times.
The AWC further revealed that the firm received a warning from FINRA in July of 2016 in regard to its lack of supervision system and written supervision procedures specifically concerning the non-traditional exchange traded funds. The firm evidently responded to FINRA’s concerns, stating that it would correct the problem by forcing its representatives to become trained on those investments in order to sell them; and requiring disclosure statements about risks of non-traditional exchange traded funds to be signed by customers who purchased the products. Yet, Parkland Securities LLC did not timely implement the corrective steps. Particularly, it was not until March 21, 2018 that Parkland Securities commenced those discussions with customers. FINRA found the firm’s failure to timely address its supervisory deficiencies as violative of FINRA Rules 2010 and 3110 and National Association of Securities Dealers (NASD) Rule 3010.
