World Equity Group, Inc., headquartered in Arlington Heights, Illinois, was fined $50,000.00 and censured by Financial Industry Regulatory Authority (FINRA) after consenting to findings that the firm failed to supervise unsuitable and excessive equity trading. Letter of Acceptance, Waiver and Consent, No. 2014039231401 (Apr. 25, 2016).
According to the AWC, from November 2009 through September 2012, the firm had failed to create and implement supervisory practices and procedures in order to identify and possibly prevent unsuitable and excessive trading of equity based investments. Apparently, the firm had relied on trade blotters to be produced daily for compliance personnel in order to identify the abnormal trading.
The AWC stated that the trade blotters utilized by the firm had not taken into consideration several indicators of unsuitable and excessive trading into account. Apparently, the blotters did not consider cost/equity ratios as well as turnover rates, or provide details about commissions associated with the trades in the accounts of customers.
FINRA further indicated that the firm had not utilized exception reports, even though the firm apparently had received such reports from clearing firms in order to identify excessive trading. The AWC stated that it was not until October 2012 that the firm start using the exception reports.
The AWC additionally stated that the written procedures implemented by the firm were deemed inadequate by FINRA, in that they did not provide legitimate guidance on how the abnormal trading could be discovered through analysis of the trade blotters. WEG seemingly failed to have supervisory protocol which could be implemented in order to protect investors from excessive and unsuitable activity. As a result, FINRA found that the firm violated Rule 2010, as well as NASD Conduct Rule 3010.
This is not the first time that WEG has been censured and fined for improper conduct. Prior to this point, the firm was censured and fined $200,000.00 by FINRA after consenting to findings that it violated FINRA Rule 2010, and NASD Rules 3010, 2110, 2310, and 3310. Letter of Acceptance, Waiver and Consent, No. 20120307347. Apparently, the firm had inadequate supervisory practices and procedures pertaining to sales of non-traditional exchange traded funds; supervisory failures pertaining to due diligence for private placement investments; and other account maintenance failures.
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