James W. Anderson of Oklahoma City, Oklahoma, a stockbroker with WFG Investments, Inc., was fined $15,000 and suspended for fifteen months from associating with a Financial Industry Regulatory Authority (FINRA) member firm in all principal capacities after consenting to findings that he failed to supervise a stockbroker who engaged in unsuitable trading. Letter of Acceptance, Waiver and Consent, No. 2015045755001 (Jan. 27, 2016).
According to the AWC, from December 2010 through October 2012, Anderson represented WFG in the capacity of compliance manager. The AWC stated that from November 2012 through January 2014, Anderson represented the firm in the capacity of director of branch office supervision.
As such, between January 1, 2012 and June 20, 2013, FINRA stated that Anderson was responsible for supervising and undertaking compliance obligations pertaining to MB, who was one of the firm’s stockbrokers, as well as the firm’s branch office that MB worked at. The AWC stated that during this timeframe, WFG’s customers had unsuitable concentrations of securities in their firm accounts and their registered investment advisory accounts as a consequence of MB’s substantial amount of low-priced security trading. The AWC indicated that MB was authorized by his firm to effect private securities transactions for firm customers via MB?s registered investment advisory.
The AWC indicated sixty-seven percent of MB?s purchases were in low-priced securities in 2012, and this figure increased to eighty percent in 2013. The AWC stated that a substantial number MB’s customers were allocated up to eighty percent in either risky REIT investments and private placements or low-priced securities. FINRA found that MB did not account for the investment objectives, risk tolerance, or financial situation of his clients when making effecting the excessive concentrations.
According to the AWC, Anderson was cognizant of the warning signs regarding MB’s unsuitable trading as Anderson attended a firm meeting where compliance personnel raised the issue of unsuitable concentrations being made in low-priced securities, while specifically addressing MB in the process. The AWC stated that MB and other of the firm’s stockbrokers were instructed to stop such low-price security purchases from continuing to occur, at least with respect to one specific security, LB. Anderson reportedly never followed up on MB’s sales practices following the meeting, despite his knowledge of the red flags associated with such.
The AWC subsequently stated Anderson?s September 2012 audit of the San Antonio branch office that MB worked at failed to include review of low-priced security trading, advisory activity of MB and others, or whether transactions being recommended or effected by the branch office staff were suitable.
The AWC stated that Anderson was confronted with MB’s unsuitable trading issue again in January 2013, where at this time, Anderson was tasked with developing and implementing a plan for MB’s heightened supervision. Anderson reportedly failed to follow up on the plan he drafted and forwarded to the firm?s compliance personnel.
FINRA found that MB’s violations of sales practices persisted over eighteen months with the firm, and was not adequately responded to from a supervisory perspective by Anderson despite the aforementioned meetings calling for Anderson’s concern. FINRA found that Anderson violated FINRA Rule 2010 and NASD Rules 3010 and 3040(c)(2) as a result.
Public disclosure records reveal that Anderson has been subject to six disclosure incidents. On February 15, 1993, Anderson settled a customer dispute for $10,000 after the customer alleged failure to supervise and churning. On August 9, 1999, Anderson was fined $2,500 fine by National Association of Securities Dealers, Inc. (NASD) for violating NASD Rules 1120 and 2110 in connection with compliance failures committed by the firm he controlled. Acceptance, Waiver and Consent, No. C0299046 (Aug. 9, 1999).
On June 10, 2000, Anderson settled another customer dispute for $10,000 after the customer alleged breach of fiduciary responsibility, churning, fraud, failure to supervise, unfair practices, breach of contract, and negligence. On October 8, 2011, Anderson was fined $20,000 and suspended by NASD in a principal capacity for twenty days after consenting to findings that he failed to provide an adequate review of recommendations and purchases/sales of securities for suitability, in violation of NASD Rules 3010 and 2110.
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