Rembert D. McNeer III, of Parsippany, New Jersey, a stockbroker formerly registered with Summit Equities, Inc., was fined $10,000.00 and suspended for one-year from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity after consenting to findings that he failed to properly supervise the activity of a Summit Equities registered representative. Letter of Acceptance, Waiver and Consent, No. 2015045602601 (Oct. 31, 2016).
Per the AWC, between 2001 and 2012, McNeer supervised registered representative, DG. Apparently, McNeer approved DG for opening GEH, a broker-dealer which was designed to sell the securities of a hedge fund, DC, which DG was the controller of. In connection with the approval; however, DG was reportedly informed by McNeer that DG would be required to place all securities trades via Summit Equities, and only utilize GEH as the seller of DC securities.
The AWC stated that DG did not act in conformance with the restrictions imposed by McNeer. Particularly, DG reportedly used GEH as the broker-dealer of hedge funds not including DC, where the sales associated with such were not made known to Summit Equities. The AWC revealed that in one occasion, which occurred in 2011, DG effected sales of limited partnerships in IME Fund, where eleven customers made investments estimated at $6,200,000.00 in the aggregate.
The AWC further stated that the eleven investors of IME were all Summit customers; yet such sales were never made known to the firm through proper disclosures. The AWC reported that the IME fund failed in September of 2011, resulting in investors sustaining losses amounting to ninety-five percent of contributions.
FINRA stated that GEH’s activities were not reasonably supervised by McNeer. Specifically, GEH’s records and books were apparently not subjected to examination by McNeer. Further, FINRA stated that DG’s office was never inspected by McNeer, nor were DG’s e-mail communications. Ultimately, FINRA found that McNeer did not make sure that activities conducted by DG were compliant and that restrictions which McNeer imposed were effective.
FINRA noted that McNeer overlooked risks associated with IME Fund through DG’s conduct which involved the IME Fund. Particularly, the AWC stated that in 2011, $2,500,000.00 in wire transfers was requested by DG to be effected, where McNeer approved of such funds being wired and did not seek further information from DG concerning them. FINRA found that McNeer’s failure to supervise DG was violative of FINRA Rules 2010, 3010, 3040, and 2110.
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