Trustmont Financial Group, Inc., headquartered in Greensburg, Pennsylvania, was fined $100,000.00 by Financial Industry Regulatory Authority (FINRA) after consenting to findings that the firm, inter alia, did not properly supervise unit trusts transactions, and failed to adequately supervise consolidated reports which the firm distributed to customers. Letter of Acceptance, Waiver and Consent, No. 2014038914601 (Sept. 23, 2016).
According to the AWC, between September of 2012 and May of 2014, the firm failed to properly review consolidated reports which were provided to customers containing information about customers’ assets held within and outside of the firm. Particularly, the AWC stated that the firm’s registered representatives had created and disseminated to customers such consolidated reports, despite the firm not having any supervisory procedures or systems to conduct regular review. The AWC stated that FINRA previously warned firms about the need for firm’s to ensure that supervision systems associated with such consolidated reports were capable of verifying customers’ asset values associated with outside investments.
FINRA noted that the firm additionally had no systems in place in order for assets entered manually by registered representatives to be reviewed. The firm reportedly did not implement procedures in order to ensure that the reports disseminated to customers would be retained and reviewed by supervisory personnel. FINRA found that the firm’s supervisory failure in this regard was violative of FINRA Rules 2010 and NASD Conduct Rule 3010(a) and 3010(b).
The AWC further stated that the firm did not effect and maintain supervisory systems and procedures that concerned unit investment trusts transactions. Apparently, the firm’s supervisory procedures, which were based upon procedures associated with mutual funds transactions, called for the firm to utilize a review of a manual blotter and exception reports in order to prevent transactions involving the switch of unit investment trusts when such transactions were unsuitable.
Apparently, the firm failed to implement an exception report for unit investment trusts. FINRA found that the firm’s manual blotter was defective, in that it failed to take into account all the transactions of unit investment trusts that were effected by the firm. FINRA found that the firm violated FINRA Rules 2010 and NASD Conduct Rules 3010(b).
The AWC reported that Trustmont was previously censured and fined for supervisory failures. In one case, the firm was charged an administrative assessment of $100,000.00 and legal and investigative fees totaling $25,000.00 by The Commonwealth of Pennsylvania after the firm consented to findings that it failed to properly supervise a registered representative’s private securities transactions and outside business activities. Docket No. 13-0070 (Nov. 2013).
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