INFINEX INVESTMENTS, INC.

BrokerCheck Report

INFINEX INVESTMENTS, INC.

Section Title

Report Summary

Firm History

CRD# 35371

1

11

Firm Profile 2 - 10

Page(s)

Firm Operations 12 - 17

Disclosure Events 18

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CRD# 35371

SEC# 8-46661

Main Office Location

538 PRESTON AVENUEMERIDEN, CT 06450-4858Regulated by FINRA Boston Office

Mailing Address

538 PRESTON AVENUEMERIDEN, CT 06450-4858

This firm is a brokerage firm and an investmentadviser firm. For more information aboutinvestment adviser firms, visit the SEC'sInvestment Adviser Public Disclosure website at:

Business Telephone Number

203-599-6000

https://www.adviserinfo.sec.gov

Report Summary for this Firm

This report summary provides an overview of the brokerage firm. Additional information for this firm can be foundin the detailed report.

Disclosure Events

Brokerage firms are required to disclose certaincriminal matters, regulatory actions, civil judicialproceedings and financial matters in which the firm orone of its control affiliates has been involved.

Are there events disclosed about this firm? Yes

The following types of disclosures have beenreported:

Type Count

Regulatory Event 8

Firm Profile

This firm is classified as a corporation.

This firm was formed in Connecticut on 04/07/1993.

Its fiscal year ends in December.

Firm History

Information relating to the brokerage firm's historysuch as other business names and successions(e.g., mergers, acquisitions) can be found in thedetailed report.

Firm Operations

Is this brokerage firm currently suspended with anyregulator? No

This firm conducts 12 types of businesses.

This firm is not affiliated with any financial orinvestment institutions.

This firm has referral or financial arrangements withother brokers or dealers.

This firm is registered with:

• the SEC• 1 Self-Regulatory Organization• 53 U.S. states and territories

www.finra.org/brokercheck User Guidance

1©2021 FINRA. All rights reserved. Report about INFINEX INVESTMENTS, INC.

https://adviserinfo.sec.gov/firm/summary/35371


http://www.finra.org/brokercheck

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This firm is classified as a corporation.

This firm was formed in Connecticut on 04/07/1993.

CRD#

This section provides the brokerage firm's full legal name, "Doing Business As" name, business and mailingaddresses, telephone number, and any alternate name by which the firm conducts business and where such name isused.

Firm Profile

Firm Names and Locations

Its fiscal year ends in December.


SEC#

35371

8-46661

Main Office Location

Mailing Address

Business Telephone Number

Doing business as INFINEX INVESTMENTS, INC.

203-599-6000

Regulated by FINRA Boston Office








This section provides information relating to all direct owners and executive officers of the brokerage firm.

Direct Owners and Executive Officers

Firm Profile

Position

Percentage of Ownership

Is this a public reportingcompany?

Position Start Date

Does this owner direct themanagement or policies ofthe firm?

INFINEX FINANCIAL HOLDINGS, INC.

HOLDING COMPANY

75% or more

No

Domestic Entity

05/2015

No

Is this a domestic or foreignentity or an individual?

Legal Name & CRD# (if any):

Position



Position Start Date


AMARANTE, STEPHEN PAUL

PRESIDENT & CEO

Less than 5%

No

Individual

03/1999

Yes

3165067



Position


Position Start Date

BOUCHER, JOHN CLYDE

DIRECTOR

Less than 5%

Individual

08/2009

5717929








Direct Owners and Executive Officers (continued)

Firm Profile




Less than 5%

No

Yes

Position



Position Start Date


COONEY, JOHN MICHAEL

CHIEF COMPLIANCE OFFICER

Less than 5%

No

Individual

03/2016

Yes

1326757



Position



Position Start Date


CUMMINGS, WILLIAM FRANCIS

EXECUTIVE VICE PRESIDENT, COO AND GENERAL COUNSEL

Less than 5%

No

Individual

04/2004

Yes

4761165



EGAN, JAMES DANIEL

4533727








Firm Profile

Position



Position Start Date


DIRECTOR

Less than 5%

No

Individual

04/2002

Yes

4533727


Position



Position Start Date


FORTE, DANIEL JOHN

VICE CHAIRMAN

Less than 5%

No

Individual

11/1999

Yes

4126203



Position


Position Start Date


GOZ, MARGARET C

EXECUTIVE VICE PRESIDENT, CFO & TREASURER

Less than 5%

Individual

06/2021

Yes

5458296









Firm Profile



No

Yes

Position



Position Start Date


MARTIN, JOHN FRANCIS JR

FINANCIAL & OPERATIONS PRINCIPAL

Less than 5%

No

Individual

02/1999

Yes

1798406



Position



Position Start Date


MARTOCCI, JOHN JOSEPH

DIRECTOR

Less than 5%

No

Individual

05/1995

Yes

2912521



MILLER, CALVIN RICHARD

Individual

5621360









Firm Profile

Position



Position Start Date


DIRECTOR

Less than 5%

No

Individual

10/2008

Yes


Position



Position Start Date


MURPHY, KATHLEEN MARIE

DIRECTOR

Less than 5%

No

Individual

03/2021

Yes

7361275



Position


Position Start Date


NOONAN, GERALD MICHAEL

CHAIRMAN

Less than 5%

Individual

04/1993

Yes

2420455









Firm Profile



No

Yes

Position



Position Start Date


PAQUETTE, CHARLES BORROMEE

DIRECTOR

Less than 5%

No

Individual

05/1995

Yes

2912527



Position



Position Start Date


SHEARIN, JOE ALLEN

DIRECTOR

Less than 5%

No

Individual

10/2008

Yes

5622600



SMITH, GARY CHARLES

Individual

2912529









Firm Profile

Position



Position Start Date


DIRECTOR

Less than 5%

No

Individual

04/1995

Yes


Position



Position Start Date


WATTS, ROBERT GLENN

DIRECTOR

Less than 5%

No

Individual

01/2009

Yes

5638937








This section provides information relating to any indirect owners of the brokerage firm.

Indirect Owners

Firm Profile

No information reported.






Firm History

This section provides information relating to any successions (e.g., mergers, acquisitions) involving the firm.

No information reported.






Firm Operations

RegistrationsThis section provides information about the regulators (Securities and Exchange Commission (SEC), self-regulatoryorganizations (SROs), and U.S. states and territories) with which the brokerage firm is currently registered andlicensed, the date the license became effective, and certain information about the firm's SEC registration.

This firm is currently registered with the SEC, 1 SRO and 53 U.S. states and territories.

SEC Registration Questions

This firm is registered with the SEC as:

A broker-dealer:

A broker-dealer and government securities broker or dealer:

A government securities broker or dealer only:

This firm has ceased activity as a government securities broker or dealer:

Yes

Yes

No

No

Federal Regulator Status Date Effective

SEC Approved 11/23/1993

Self-Regulatory Organization Status Date Effective

FINRA Approved 03/10/1994






Firm Operations

Registrations (continued)

U.S. States &Territories

Status Date Effective

Alabama Approved 05/18/2006

Alaska Approved 03/25/2008

Arizona Approved 01/27/2004

Arkansas Approved 04/21/2011

California Approved 09/14/2000

Colorado Approved 11/05/2004

Connecticut Approved 03/21/1994

Delaware Approved 03/10/2004

District of Columbia Approved 06/02/2008

Florida Approved 10/19/1994

Georgia Approved 01/26/2001

Hawaii Approved 05/29/2008

Idaho Approved 03/09/2009

Illinois Approved 08/24/2007

Indiana Approved 02/12/2004

Iowa Approved 09/26/2011

Kansas Approved 04/25/2011

Kentucky Approved 03/17/2003

Louisiana Approved 04/17/2007

Maine Approved 03/07/2001

Maryland Approved 11/12/1997

Massachusetts Approved 12/12/1994

Michigan Approved 12/12/2002

Minnesota Approved 05/19/2008

Mississippi Approved 01/05/2011

Missouri Approved 01/01/1999

Montana Approved 02/16/2011

Nebraska Approved 03/03/2008

Nevada Approved 05/06/2008

New Hampshire Approved 08/22/1994

New Jersey Approved 09/15/1998

New Mexico Approved 02/12/2003

New York Approved 01/10/1995

U.S. States &Territories

Status Date Effective

North Carolina Approved 09/29/2003

North Dakota Approved 03/03/2010

Ohio Approved 03/05/2003

Oklahoma Approved 09/15/2010

Oregon Approved 02/26/2008

Pennsylvania Approved 07/18/2000

Puerto Rico Approved 04/01/2015

Rhode Island Approved 07/21/1994

South Carolina Approved 10/19/1998

South Dakota Approved 11/03/2010

Tennessee Approved 03/07/2006

Texas Approved 01/04/1999

Utah Approved 06/21/2006

Vermont Approved 09/05/1997

Virgin Islands Approved 05/05/2017

Virginia Approved 05/02/2001

Washington Approved 06/03/2004

West Virginia Approved 09/07/2006

Wisconsin Approved 08/31/2009

Wyoming Approved 05/11/2011






Firm Operations

Types of BusinessThis section provides the types of business, including non-securities business, the brokerage firm is engaged in orexpects to be engaged in.

Other Types of Business

This firm does not effect transactions in commodities, commodity futures, or commodity options.This firm does engage in other non-securities business.

Non-Securities Business Description: INSURANCE AGENCY OFFERING FIXED ANNUITIES AND OTHER FIXEDINSURANCE PRODUCTS UNDER STATE LICENSES.

This firm currently conducts 12 types of businesses.

Types of Business

Broker or dealer retailing corporate equity securities over-the-counter

Broker or dealer selling corporate debt securities

Mutual fund retailer

U S. government securities broker

Municipal securities broker

Broker or dealer selling variable life insurance or annuities

Put and call broker or dealer or option writer

Investment advisory services

Non-exchange member arranging for transactions in listed securities by exchange member

Broker or dealer selling interests in mortgages or other receivables

Broker or dealer involved in a networking, kiosk or similar arrangment with a: bank, savings bank or association, orcredit union

Other - BROKER/DEALER OFFERING REITS NOT LISTED ON AN EXCHANGE ON A BEST EFFORTS BASIS.






Firm Operations

Clearing Arrangements

This firm does not hold or maintain funds or securities or provide clearing services for other broker-dealer(s).

Introducing Arrangements

This firm does refer or introduce customers to other brokers and dealers.

Name: PERSHING LLC

Business Address: ONE PERSHING PLAZAJERSEY CITY, NJ 07399

CRD #: 7560

Effective Date: 03/01/1995

Description: CLEARING ARRANGEMENT WITH PERSHING LLC. INFINEXINVESTMENTS, INC. IS A FULLY DISCLOSED INTRODUCINGBROKER/DEALER.






Firm Operations

Industry Arrangements

This firm does have books or records maintained by a third party.

This firm does have accounts, funds, or securities maintained by a third party.

This firm does have customer accounts, funds, or securities maintained by a third party.

This firm does not have individuals who control its management or policies through agreement.

This firm does not have individuals who wholly or partly finance the firm's business.

Control Persons/Financing

Name: PERSHING LLC


CRD #: 7560



Name: PERSHING LLC


CRD #: 7560



Name: PERSHING LLC


CRD #: 7560








Firm Operations

Organization AffiliatesThis section provides information on control relationships the firm has with other firms in the securities, investmentadvisory, or banking business.

This firm is not, directly or indirectly:

· in control of· controlled by· or under common control withthe following partnerships, corporations, or other organizations engaged in the securities or investmentadvisory business.

This firm is not directly or indirectly, controlled by the following:

· bank holding company· national bank· state member bank of the Federal Reserve System· state non-member bank· savings bank or association· credit union· or foreign bank






Disclosure Events

All firms registered to sell securities or provide investment advice are required to disclose regulatory actions, criminal orcivil judicial proceedings, and certain financial matters in which the firm or one of its control affiliates has been involved.For your convenience, below is a matrix of the number and status of disclosure events involving this brokerage firm orone of its control affiliates. Further information regarding these events can be found in the subsequent pages of thisreport.

Final On AppealPending

Regulatory Event 0 8 0






Disclosure Event Details

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being appealed.§ A "final" event has been concluded and its resolution is not subject to change.

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Regulatory - Final

This type of disclosure event involves (1) a final, formal proceeding initiated by a regulatory authority (e.g., a statesecurities agency, self-regulatory organization, federal regulator such as the U.S. Securities and Exchange Commission,foreign financial regulatory body) for a violation of investment-related rules or regulations; or (2) a revocation orsuspension of the authority of a brokerage firm or its control affiliate to act as an attorney, accountant or federalcontractor.

Disclosure 1 of 8

Reporting Source: Regulator

Allegations: IA RELEASE 5133, MARCH 11, 2019: THE SECURITIES AND EXCHANGECOMMISSION DEEMS IT APPROPRIATE AND IN THE PUBLIC INTEREST THATPUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BEINSTITUTED AGAINST INFINEX INVESTMENTS, INC., ("RESPONDENT"). ONTHE BASIS OF THIS ORDER AND RESPONDENT'S OFFER, THECOMMISSION FINDS THAT THESE PROCEEDINGS ARISE OUT OFBREACHES OF FIDUCIARY DUTY AND INADEQUATE DISCLOSURES BY THERESPONDENT IN CONNECTION WITH ITS MUTUAL FUND SHARE CLASSSELECTION PRACTICES AND THE FEES IT RECEIVED. AT TIMES DURINGTHE RELEVANT PERIOD, RESPONDENT PURCHASED, RECOMMENDED, ORHELD FOR ADVISORY CLIENTS MUTUAL FUND SHARE CLASSES THATCHARGED 12B-1 FEES INSTEAD OF LOWER-COST SHARE CLASSES OF THESAME FUNDS FOR WHICH THE CLIENTS WERE ELIGIBLE. RESPONDENTRECEIVED 12B-1 FEES IN CONNECTION WITH THESE INVESTMENTS.RESPONDENT FAILED TO DISCLOSE IN ITS FORM ADV OR OTHERWISE THECONFLICTS OF INTEREST RELATED TO (A) ITS RECEIPT OF 12B-1 FEES,AND/OR (B) ITS SELECTION OF MUTUAL FUND SHARE CLASSES THAT PAYSUCH FEES. DURING THE RELEVANT PERIOD, RESPONDENT RECEIVED12B-1 FEES FOR ADVISING CLIENTS TO INVEST IN OR HOLD SUCH MUTUALFUND SHARE CLASSES. AS A RESULT OF THE CONDUCT, RESPONDENTWILLFULLY VIOLATED SECTIONS 206(2) AND 207 OF THE ADVISERS ACT.

Current Status: Final






Initiated By: UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Principal Sanction(s)/ReliefSought:

Other Sanction(s)/ReliefSought:

N/A

Date Initiated: 03/11/2019

Docket/Case Number: 3-19036

Principal Product Type: Mutual Fund(s)

Other Product Type(s):

Allegations: IA RELEASE 5133, MARCH 11, 2019: THE SECURITIES AND EXCHANGECOMMISSION DEEMS IT APPROPRIATE AND IN THE PUBLIC INTEREST THATPUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BEINSTITUTED AGAINST INFINEX INVESTMENTS, INC., ("RESPONDENT"). ONTHE BASIS OF THIS ORDER AND RESPONDENT'S OFFER, THECOMMISSION FINDS THAT THESE PROCEEDINGS ARISE OUT OFBREACHES OF FIDUCIARY DUTY AND INADEQUATE DISCLOSURES BY THERESPONDENT IN CONNECTION WITH ITS MUTUAL FUND SHARE CLASSSELECTION PRACTICES AND THE FEES IT RECEIVED. AT TIMES DURINGTHE RELEVANT PERIOD, RESPONDENT PURCHASED, RECOMMENDED, ORHELD FOR ADVISORY CLIENTS MUTUAL FUND SHARE CLASSES THATCHARGED 12B-1 FEES INSTEAD OF LOWER-COST SHARE CLASSES OF THESAME FUNDS FOR WHICH THE CLIENTS WERE ELIGIBLE. RESPONDENTRECEIVED 12B-1 FEES IN CONNECTION WITH THESE INVESTMENTS.RESPONDENT FAILED TO DISCLOSE IN ITS FORM ADV OR OTHERWISE THECONFLICTS OF INTEREST RELATED TO (A) ITS RECEIPT OF 12B-1 FEES,AND/OR (B) ITS SELECTION OF MUTUAL FUND SHARE CLASSES THAT PAYSUCH FEES. DURING THE RELEVANT PERIOD, RESPONDENT RECEIVED12B-1 FEES FOR ADVISING CLIENTS TO INVEST IN OR HOLD SUCH MUTUALFUND SHARE CLASSES. AS A RESULT OF THE CONDUCT, RESPONDENTWILLFULLY VIOLATED SECTIONS 206(2) AND 207 OF THE ADVISERS ACT.

Resolution Date: 03/11/2019

Resolution:

Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?

Yes

Sanctions Ordered: CensureDisgorgement/RestitutionCease and Desist/Injunction

Order






Other Sanctions Ordered: UNDERTAKINGS AND PREJUDGMENT INTEREST

Sanction Details: THE RESPONDENT SHALL CEASE AND DESIST FROM COMMITTING ORCAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTIONS206(2) AND 207 OF THE ADVISERS ACT. RESPONDENT IS CENSURED,SHALL PAY DISGORGEMENT OF $865,932.01 AND PREJUDGMENT INTERESTOF $112,766.80, AND SHALL COMPLY WITH THE UNDERTAKINGSENUMERATED IN THE OFFER OF SETTLEMENT.

Regulator Statement RESPONDENT HAS SUBMITTED AN OFFER OF SETTLEMENT WHICH THECOMMISSION HAS DETERMINED TO ACCEPT. IN VIEW OF THE FOREGOING,THE COMMISSION DEEMS IT APPROPRIATE IN THE PUBLIC INTEREST TOIMPOSE THE SANCTIONS AGREED TO IN THE RESPONDENT'S OFFER.RESPONDENT SELF-REPORTED TO THE COMMISSION THE VIOLATIONSDISCUSSED IN THIS ORDER PURSUANT TO THE DIVISION OFENFORCEMENT'S SHARE CLASS SELECTION DISCLOSURE INITIATIVE("SCSD INITIATIVE"). ACCORDINGLY, THIS ORDER AND RESPONDENT'SOFFER ARE BASED ON THE INFORMATION SELF-REPORTED BYRESPONDENT.


iReporting Source: Firm

Initiated By: SECURITIES AND EXCHANGE COMMISSION


Cease and Desist


SANCTION AND DISGORGEMENT


Docket/Case Number: 3-19036

Principal Product Type: Mutual Fund(s)


Allegations: INFINEX, IN ITS CAPACITY AS AN INVESTMENT ADVISER, VOLUNTARILYPARTICIPATED IN THE SEC'S SHARE CLASS SELECTION DISCLOSUREINITIATIVE. PURSUANT TO THE INITIATIVE, INFINEX SELF-REPORTED TOTHE SEC THAT IT FAILED TO ADEQUATELY DISCLOSE CONFLICTS OFINTEREST RELATED TO THE SALE OF HIGHER COST MUTUAL FUND SHARECLASSES WHEN LOWER COST SHARE CLASSES WERE AVAILABLE BYPLACING CLIENTS IN MUTUAL FUND SHARE CLASSES THAT CHARGED 12B-1 FEES WHEN LOWER COST SHARE CLASSES MAY HAVE BEEN AVAILABLE.








SANCTION AND DISGORGEMENT


Resolution:

Other Sanctions Ordered:

Sanction Details: THE RESPONDENT SHALL CEASE AND DESIST FROM COMMITTING ORCAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTIONS206(2) AND 207 OF THE ADVISERS ACT. RESPONDENT IS CENSURED,SHALL PAY DISGORGEMENT OF $865,932.01 AND PREJUDGMENT INTERESTOF $112,766.80, AND SHALL COMPLY WITH THE UNDERTAKINGSENUMERATED IN THE OFFER OF SETTLEMENT.

Firm Statement RESPONDENT HAS SUBMITTED AND OFFER OF SETTLEMENT WHICH THECOMMISSION HAS DETERMINED TO ACCEPT. IN VIEW OF THE FOREGOING,THE COMMISSION DEEMS IT APPROPRIATE IN THE PUBLIC INTEREST TOIMPOSE THE SANCTIONS AGREED TO IN THE RESPONDENT'S OFFER.RESPONDENT SELF-REPORTED TO THE COMMISSION THE VIOLATIONSDISCUSSED IN THIS ORDER PURSUANT TO THE DIVISION OFENFORCEMENT'S SHARE CLASS SELECTION DISCLOSURE INITIATIVE("SCSD INITIATIVE"). ACCORDINGLY, THIS ORDER AND RESPONDENT'SOFFER ARE BASED ON THE INFORMATION SELF-REPORTED BY THERESPONDENT.


Order

Disclosure 2 of 8

i


Initiated By: MASSACHUSETTS SECURITIES DIVISION


Cease and Desist


Docket/Case Number: E-2017-0092

URL for Regulatory Action: HTTPS://WWW.SEC.STATE.MA.US/SCT/CURRENT/SCTINFINEX/EXECUTED-INFINEX-CONSENT-ORDER-E-2017-0092.PDF

Principal Product Type: Other


Allegations: INFINEX FAILED TO REASONABLY SUPERVISE ITS REGISTEREDREPRESENTATIVES OPERATING ON BANK PREMISES.








Cease and Desist


CENSURE, RESCISSION, RESTITUTION, COMPLIANCE REVIEW,ADMINISTRATIVE FINE


Resolution:

Other Sanctions Ordered: INDEPENDENT COMPLIANCE REVIEW

Sanction Details: N/A

Regulator Statement MASSACHUSETTS RECEIVED A NUMBER OF COMPLAINTS ALLEGINGCUSTOMERS WERE NOT FULLY INFORMED ABOUT THE HIGH-COMMISSIONPRODUCTS THEY WERE PURCHASING. THESE CUSTOMERS WEREDEALING WITH INFINEX REPRESENTATIVES CONDUCTING BROKERAGEBUSINESS AT THEIR LOCAL BANKS.


No

Sanctions Ordered: CensureMonetary/Fine $125,000.00Disgorgement/RestitutionCease and Desist/Injunction

Consent


Initiated By: MASSACHUSETTS SECURITIES DIVISION


Cease and Desist




Docket/Case Number: E-2017-0092


Other Product Type(s): N/A

Allegations: AS A BROKER-DEALER, FAILED TO REASONABLY SUPERVISE ITSREGISTERED REPRESENTATIVES OPERATING ON BANK PREMISES.










Resolution:

Other Sanctions Ordered: INDEPENDENT COMPLIANCE REVIEW.

Sanction Details: N/A

Firm Statement IN JULY OF 2018, INFINEX ENTERED INTO A CONSENT ORDER WITH THECOMMONWEALTH OF MASSACHUSETTS REGARDING INFINEX'S FAILURETO REASONABLY SUPERVISE SEVERAL TRANSACTIONS EXECUTED BYFOUR REGISTERED REPRESENTATIVES AFFILIATED WITH THREE BANKS INNETWORKING RELATIONSHIPS WITH INFINEX. WITHOUT ADMITTING ORDENYING THE FINDINGS, INFINEX CONSENTED TO A CENSURE,FINE,RESTITUTION TO CLIENT ACCOUNTS AND THE ENGAGEMENT OF ACONSULTANT TO REVIEW INFINEX'S SUPERVISORY POLICIES ANDPROCEDURES.

Sanctions Ordered: CensureMonetary/Fine $125,000.00Disgorgement/RestitutionCease and Desist/Injunction

Consent

Disclosure 3 of 8

i


Initiated By: FINRA

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOIDENTIFY AND APPLY SALES CHARGE DISCOUNTS TO CERTAINCUSTOMERS' ELIGIBLE PURCHASES OF UNIT INVESTMENT TRUSTS (UITS)RESULTING IN CUSTOMERS PAYING EXCESSIVE SALES CHARGES OFAPPROXIMATELY $109,628. THE FINDINGS STATED THAT THE FIRM HASPAID RESTITUTION TO ALL AFFECTED CUSTOMERS. THE FINDINGS ALSOSTATED THAT THE FIRM FAILED TO ESTABLISH, MAINTAIN AND ENFORCE ASUPERVISORY SYSTEM AND WRITTEN SUPERVISORY PROCEDURES(WSPS) REASONABLY DESIGNED TO ENSURE THAT CUSTOMERSRECEIVED SALES CHARGE DISCOUNTS ON ALL ELIGIBLE UIT PURCHASES.THE FIRM RELIED PRIMARILY ON ITS REGISTERED REPRESENTATIVES TOENSURE THAT CUSTOMERS RECEIVED APPROPRIATE UIT SALES CHARGEDISCOUNTS, DESPITE THE FACT THAT THE FIRM DID NOT EFFECTIVELYINFORM AND TRAIN REPRESENTATIVES AND THEIR SUPERVISORS TOIDENTIFY AND APPLY SUCH SALES CHARGE DISCOUNTS.







Initiated By: FINRA


Other


N/A


Docket/Case Number: 2014041841901

Principal Product Type: Unit Investment Trust(s)



Resolution:


Sanction Details: THE FIRM IS CENSURED, FINED $150,000, AND PAID RESTITUTION OF109,627.84 TO CUSTOMERS.FINE PAID IN FULL ON NOVEMBER 5, 2015.


No

Sanctions Ordered: CensureMonetary/Fine $150,000.00Disgorgement/Restitution

Acceptance, Waiver & Consent(AWC)


Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOIDENTIFY AND APPLY SALES CHARGE DISCOUNTS TO CERTAINCUSTOMERS' ELIGIBLE PURCHASES OF UNIT INVESTMENT TRUSTS (UITS)RESULTING IN CUSTOMERS PAYING EXCESSIVE SALES CHARGES OFAPPROXIMATELY $109,628. THE FINDINGS STATED THAT THE FIRM HASPAID RESTITUTION TO ALL AFFECTED CUSTOMERS. THE FINDINGS ALSOSTATED THAT THE FIRM FAILED TO ESTABLISH, MAINTAIN AND ENFORCE ASUPERVISORY SYSTEM AND WRITTEN SUPERVISORY PROCEDURES(WSPS) REASONABLY DESIGNED TO ENSURE THAT CUSTOMERSRECEIVED SALES CHARGE DISCOUNTS ON ALL ELIGIBLE UIT PURCHASES.THE FIRM RELIED PRIMARILY ON ITS REGISTERED REPRESENTATIVES TOENSURE THAT CUSTOMERS RECEIVED APPROPRIATE UIT SALES CHARGEDISCOUNTS, DESPITE THE FACT THAT THE FIRM DID NOT EFFECTIVELYINFORM AND TRAIN REPRESENTATIVES AND THEIR SUPERVISORS TOIDENTIFY AND APPLY SUCH SALES CHARGE DISCOUNTS.






https://www.finra.org/rules-guidance/oversight-enforcement/finra-disciplinary-actions?search=2014041841901


Initiated By: FINRA


Other


N/A



Principal Product Type: Unit Investment Trust(s)


WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOIDENTIFY AND APPLY SALES CHARGE DISCOUNTS TO CERTAINCUSTOMERS' ELIGIBLE PURCHASES OF UNIT INVESTMENT TRUSTS (UITS)RESULTING IN CUSTOMERS PAYING EXCESSIVE SALES CHARGES OFAPPROXIMATELY $109,628. THE FINDINGS STATED THAT THE FIRM HASPAID RESTITUTION TO ALL AFFECTED CUSTOMERS. THE FINDINGS ALSOSTATED THAT THE FIRM FAILED TO ESTABLISH, MAINTAIN AND ENFORCE ASUPERVISORY SYSTEM AND WRITTEN SUPERVISORY PROCEDURES(WSPS) REASONABLY DESIGNED TO ENSURE THAT CUSTOMERSRECEIVED SALES CHARGE DISCOUNTS ON ALL ELIGIBLE UIT PURCHASES.THE FIRM RELIED PRIMARILY ON ITS REGISTERED REPRESENTATIVES TOENSURE THAT CUSTOMERS RECEIVED APPROPRIATE UIT SALES CHARGEDISCOUNTS, DESPITE THE FACT THAT THE FIRM DID NOT EFFECTIVELYINFORM AND TRAIN REPRESENTATIVES AND THEIR SUPERVISORS TOIDENTIFY AND APPLY SUCH SALES CHARGE DISCOUNTS.


Resolution:


Sanction Details: THE FIRM IS CENSURED, FINED $150,000, AND PAID RESTITUTION OF109,627.84 TO CUSTOMERS.



Disclosure 4 of 8

i


Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOSUBJECT NON-TRADITIONAL EXCHANGE-TRADED FUNDS (ETFS) TO THESAME LEVEL OF REVIEW AS OTHER NEW PRODUCTS OFFERED FOR SALETO RETAIL BROKERAGE CUSTOMERS. THE FINDINGS STATED THATINSTEAD, THE FIRM ALLOWED ITS REGISTERED REPRESENTATIVES TORECOMMEND TO CUSTOMERS NON-TRADITIONAL ETFS WITHOUTPERFORMING REASONABLE DILIGENCE TO UNDERSTAND THE RISKS ANDFEATURES ASSOCIATED WITH IT.THE FIRM PERMITTED REPRESENTATIVES WHO RECEIVED MINIMALTRAINING ON NON-TRADITIONAL ETFS AND WHO FAILED TO PERFORMREASONABLE DILIGENCE TO UNDERSTAND THE RISKS AND FEATURES OFTHE PRODUCT, TO RECOMMEND TO CUSTOMERS TRANSACTIONS IN NON-TRADITIONAL ETFS. BY FAILING TO EMPLOY REASONABLE DILIGENCEREGARDING NON-TRADITIONAL ETFS, THE FIRM MISSED THEOPPORTUNITY TO EVALUATE CRITICAL ASPECTS OF THESE PRODUCTSINCLUDING THE IMPLICATIONS OF THE DAILY RESET AND LEVERAGECOMPONENTS AND TO ESTABLISH APPROPRIATE TRAINING ANDSUPERVISION PROTOCOLS. ACCORDINGLY, THESE RECOMMENDATIONSLACKED A REASONABLE BASIS AND WERE UNSUITABLE. THE FINDINGSALSO STATED THAT SOME NON-TRADITIONAL ETFS PURCHASES THAT THEFIRM RECOMMENDED, ACTING THROUGH SEVERAL BROKERS, WEREALSO UNSUITABLE UNDER A CUSTOMER-SPECIFIC SUITABILITY THEORYAS THE RECOMMENDATIONS WERE MADE TO CUSTOMERS WITHCONSERVATIVE INVESTMENT OBJECTIVES AND/OR RISK TOLERANCES.THE PROSPECTUSES FOR THE NON-TRADITIONAL ETFS THAT THE FIRMSOLD GENERALLY ADVISED THAT THEY SHOULD NOT BE HELD FOR MORETHAN ONE TRADING SESSION OR AS LONG-TERM INVESTMENTS.NOTWITHSTANDING THAT STATEMENT IN THE PROSPECTUSES, NON-TRADITIONAL ETFS WERE MAINTAINED IN CUSTOMER ACCOUNTS FORLONGER THAN SEVEN BUSINESS DAYS. CUSTOMERS WHO HADCONSERVATIVE INVESTMENT OBJECTIVES AND/OR RISK TOLERANCESAND WHOSE ETFS WERE HELD FOR SEVEN OR MORE DAYS, LOST MONEYON THEIR INVESTMENTS. THESE UNSUITABLE NON-TRADITIONAL ETFRECOMMENDATIONS RESULTED IN CUSTOMER LOSSES OF $287,171.75.THE FINDINGS ALSO INCLUDED THAT THE FIRM FAILED TO ESTABLISH ANDMAINTAIN AN ADEQUATE SUPERVISORY SYSTEM, INCLUDING WRITTENSUPERVISORY PROCEDURES (WSPS), TO MONITOR AND REVIEW THESALE OF NON-TRADITIONAL ETFS TO ITS RETAIL CUSTOMERS AND THEFIRM FAILED TO ESTABLISH AND MAINTAIN SPECIFIC WSPS FOR THEREVIEW OF NON-TRADITIONAL ETF TRANSACTIONS. THE SUPERVISORYREVIEWS THAT THE FIRM'S PRINCIPALS PERFORMED OF TRANSACTIONSINVOLVING NON-TRADITIONAL ETFS WERE INADEQUATE. THEY FAILED TOINCORPORATE THE COMPLEXITIES AND UNIQUE RISKS ASSOCIATED WITHTHESE SECURITIES, SUCH AS THEIR DAILY RESET AND LEVERAGEFEATURES. INSTEAD, THE FIRM'S PRINCIPALS REVIEWED NON-TRADITIONAL ETF TRANSACTIONS FOR SUITABILITY IN THE SAME MANNERTHEY REVIEWED TRADES INVOLVING THE FIRM'S OTHER SECURITIESPRODUCTS. THE FIRM MADE NO CHANGES TO ITS SUPERVISORY SYSTEMTO INCORPORATE GUIDANCE PROVIDED IN A REGULATORY NOTICE INREVIEWING ETF ACTIVITY UNTIL AUGUST 2009, WHEN IT IMPLEMENTEDWSPS FOR THE REVIEW OF NON-TRADITIONAL ETFS. THE FIRM FAILED TOEMPLOY A SYSTEM TO IDENTIFY WHICH OF THE ETFS BEING SOLD BY THEFIRM'S REGISTERED REPRESENTATIVES WERE NON-TRADITIONAL ANDTHEREFORE SUBJECT TO GREATER SCRUTINY. NEITHER THE FIRM'STRADE BLOTTERS NOR ITS GENERAL SUPERVISORY REPORTS WERECODED TO ALERT SUPERVISORS REGARDING THE LENGTH OF TIMECUSTOMERS HAD BEEN HOLDING NON-TRADITIONAL ETFS. THE FIRM'SSUPERVISORY SYSTEM WAS INADEQUATE TO DETECT AND MONITOR THEHOLDING PERIODS OF NON-TRADITIONAL ETFS IN CUSTOMER ACCOUNTS.THE FIRM DID NOT UTILIZE EXCEPTION REPORTS OR OTHERSURVEILLANCE REPORTS TO MONITOR ETF ACTIVITY SPECIFICALLYINCLUDING THE CLASSIFICATION OF ETFS AS LEVERAGED OR INVERSE.THE FIRM FAILED TO CONDUCT ANY TRAINING OR PROVIDE ANY WRITTENGUIDANCE FOR ITS REGISTERED PERSONNEL REGARDING THE SALE ANDSUPERVISION OF NON-TRADITIONAL ETFS.








WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOSUBJECT NON-TRADITIONAL EXCHANGE-TRADED FUNDS (ETFS) TO THESAME LEVEL OF REVIEW AS OTHER NEW PRODUCTS OFFERED FOR SALETO RETAIL BROKERAGE CUSTOMERS. THE FINDINGS STATED THATINSTEAD, THE FIRM ALLOWED ITS REGISTERED REPRESENTATIVES TORECOMMEND TO CUSTOMERS NON-TRADITIONAL ETFS WITHOUTPERFORMING REASONABLE DILIGENCE TO UNDERSTAND THE RISKS ANDFEATURES ASSOCIATED WITH IT.THE FIRM PERMITTED REPRESENTATIVES WHO RECEIVED MINIMALTRAINING ON NON-TRADITIONAL ETFS AND WHO FAILED TO PERFORMREASONABLE DILIGENCE TO UNDERSTAND THE RISKS AND FEATURES OFTHE PRODUCT, TO RECOMMEND TO CUSTOMERS TRANSACTIONS IN NON-TRADITIONAL ETFS. BY FAILING TO EMPLOY REASONABLE DILIGENCEREGARDING NON-TRADITIONAL ETFS, THE FIRM MISSED THEOPPORTUNITY TO EVALUATE CRITICAL ASPECTS OF THESE PRODUCTSINCLUDING THE IMPLICATIONS OF THE DAILY RESET AND LEVERAGECOMPONENTS AND TO ESTABLISH APPROPRIATE TRAINING ANDSUPERVISION PROTOCOLS. ACCORDINGLY, THESE RECOMMENDATIONSLACKED A REASONABLE BASIS AND WERE UNSUITABLE. THE FINDINGSALSO STATED THAT SOME NON-TRADITIONAL ETFS PURCHASES THAT THEFIRM RECOMMENDED, ACTING THROUGH SEVERAL BROKERS, WEREALSO UNSUITABLE UNDER A CUSTOMER-SPECIFIC SUITABILITY THEORYAS THE RECOMMENDATIONS WERE MADE TO CUSTOMERS WITHCONSERVATIVE INVESTMENT OBJECTIVES AND/OR RISK TOLERANCES.THE PROSPECTUSES FOR THE NON-TRADITIONAL ETFS THAT THE FIRMSOLD GENERALLY ADVISED THAT THEY SHOULD NOT BE HELD FOR MORETHAN ONE TRADING SESSION OR AS LONG-TERM INVESTMENTS.NOTWITHSTANDING THAT STATEMENT IN THE PROSPECTUSES, NON-TRADITIONAL ETFS WERE MAINTAINED IN CUSTOMER ACCOUNTS FORLONGER THAN SEVEN BUSINESS DAYS. CUSTOMERS WHO HADCONSERVATIVE INVESTMENT OBJECTIVES AND/OR RISK TOLERANCESAND WHOSE ETFS WERE HELD FOR SEVEN OR MORE DAYS, LOST MONEYON THEIR INVESTMENTS. THESE UNSUITABLE NON-TRADITIONAL ETFRECOMMENDATIONS RESULTED IN CUSTOMER LOSSES OF $287,171.75.THE FINDINGS ALSO INCLUDED THAT THE FIRM FAILED TO ESTABLISH ANDMAINTAIN AN ADEQUATE SUPERVISORY SYSTEM, INCLUDING WRITTENSUPERVISORY PROCEDURES (WSPS), TO MONITOR AND REVIEW THESALE OF NON-TRADITIONAL ETFS TO ITS RETAIL CUSTOMERS AND THEFIRM FAILED TO ESTABLISH AND MAINTAIN SPECIFIC WSPS FOR THEREVIEW OF NON-TRADITIONAL ETF TRANSACTIONS. THE SUPERVISORYREVIEWS THAT THE FIRM'S PRINCIPALS PERFORMED OF TRANSACTIONSINVOLVING NON-TRADITIONAL ETFS WERE INADEQUATE. THEY FAILED TOINCORPORATE THE COMPLEXITIES AND UNIQUE RISKS ASSOCIATED WITHTHESE SECURITIES, SUCH AS THEIR DAILY RESET AND LEVERAGEFEATURES. INSTEAD, THE FIRM'S PRINCIPALS REVIEWED NON-TRADITIONAL ETF TRANSACTIONS FOR SUITABILITY IN THE SAME MANNERTHEY REVIEWED TRADES INVOLVING THE FIRM'S OTHER SECURITIESPRODUCTS. THE FIRM MADE NO CHANGES TO ITS SUPERVISORY SYSTEMTO INCORPORATE GUIDANCE PROVIDED IN A REGULATORY NOTICE INREVIEWING ETF ACTIVITY UNTIL AUGUST 2009, WHEN IT IMPLEMENTEDWSPS FOR THE REVIEW OF NON-TRADITIONAL ETFS. THE FIRM FAILED TOEMPLOY A SYSTEM TO IDENTIFY WHICH OF THE ETFS BEING SOLD BY THEFIRM'S REGISTERED REPRESENTATIVES WERE NON-TRADITIONAL ANDTHEREFORE SUBJECT TO GREATER SCRUTINY. NEITHER THE FIRM'STRADE BLOTTERS NOR ITS GENERAL SUPERVISORY REPORTS WERECODED TO ALERT SUPERVISORS REGARDING THE LENGTH OF TIMECUSTOMERS HAD BEEN HOLDING NON-TRADITIONAL ETFS. THE FIRM'SSUPERVISORY SYSTEM WAS INADEQUATE TO DETECT AND MONITOR THEHOLDING PERIODS OF NON-TRADITIONAL ETFS IN CUSTOMER ACCOUNTS.THE FIRM DID NOT UTILIZE EXCEPTION REPORTS OR OTHERSURVEILLANCE REPORTS TO MONITOR ETF ACTIVITY SPECIFICALLYINCLUDING THE CLASSIFICATION OF ETFS AS LEVERAGED OR INVERSE.THE FIRM FAILED TO CONDUCT ANY TRAINING OR PROVIDE ANY WRITTENGUIDANCE FOR ITS REGISTERED PERSONNEL REGARDING THE SALE ANDSUPERVISION OF NON-TRADITIONAL ETFS.






Initiated By: FINRA






Other Product Type(s): EXCHANGE-TRADED FUNDS

WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOSUBJECT NON-TRADITIONAL EXCHANGE-TRADED FUNDS (ETFS) TO THESAME LEVEL OF REVIEW AS OTHER NEW PRODUCTS OFFERED FOR SALETO RETAIL BROKERAGE CUSTOMERS. THE FINDINGS STATED THATINSTEAD, THE FIRM ALLOWED ITS REGISTERED REPRESENTATIVES TORECOMMEND TO CUSTOMERS NON-TRADITIONAL ETFS WITHOUTPERFORMING REASONABLE DILIGENCE TO UNDERSTAND THE RISKS ANDFEATURES ASSOCIATED WITH IT.THE FIRM PERMITTED REPRESENTATIVES WHO RECEIVED MINIMALTRAINING ON NON-TRADITIONAL ETFS AND WHO FAILED TO PERFORMREASONABLE DILIGENCE TO UNDERSTAND THE RISKS AND FEATURES OFTHE PRODUCT, TO RECOMMEND TO CUSTOMERS TRANSACTIONS IN NON-TRADITIONAL ETFS. BY FAILING TO EMPLOY REASONABLE DILIGENCEREGARDING NON-TRADITIONAL ETFS, THE FIRM MISSED THEOPPORTUNITY TO EVALUATE CRITICAL ASPECTS OF THESE PRODUCTSINCLUDING THE IMPLICATIONS OF THE DAILY RESET AND LEVERAGECOMPONENTS AND TO ESTABLISH APPROPRIATE TRAINING ANDSUPERVISION PROTOCOLS. ACCORDINGLY, THESE RECOMMENDATIONSLACKED A REASONABLE BASIS AND WERE UNSUITABLE. THE FINDINGSALSO STATED THAT SOME NON-TRADITIONAL ETFS PURCHASES THAT THEFIRM RECOMMENDED, ACTING THROUGH SEVERAL BROKERS, WEREALSO UNSUITABLE UNDER A CUSTOMER-SPECIFIC SUITABILITY THEORYAS THE RECOMMENDATIONS WERE MADE TO CUSTOMERS WITHCONSERVATIVE INVESTMENT OBJECTIVES AND/OR RISK TOLERANCES.THE PROSPECTUSES FOR THE NON-TRADITIONAL ETFS THAT THE FIRMSOLD GENERALLY ADVISED THAT THEY SHOULD NOT BE HELD FOR MORETHAN ONE TRADING SESSION OR AS LONG-TERM INVESTMENTS.NOTWITHSTANDING THAT STATEMENT IN THE PROSPECTUSES, NON-TRADITIONAL ETFS WERE MAINTAINED IN CUSTOMER ACCOUNTS FORLONGER THAN SEVEN BUSINESS DAYS. CUSTOMERS WHO HADCONSERVATIVE INVESTMENT OBJECTIVES AND/OR RISK TOLERANCESAND WHOSE ETFS WERE HELD FOR SEVEN OR MORE DAYS, LOST MONEYON THEIR INVESTMENTS. THESE UNSUITABLE NON-TRADITIONAL ETFRECOMMENDATIONS RESULTED IN CUSTOMER LOSSES OF $287,171.75.THE FINDINGS ALSO INCLUDED THAT THE FIRM FAILED TO ESTABLISH ANDMAINTAIN AN ADEQUATE SUPERVISORY SYSTEM, INCLUDING WRITTENSUPERVISORY PROCEDURES (WSPS), TO MONITOR AND REVIEW THESALE OF NON-TRADITIONAL ETFS TO ITS RETAIL CUSTOMERS AND THEFIRM FAILED TO ESTABLISH AND MAINTAIN SPECIFIC WSPS FOR THEREVIEW OF NON-TRADITIONAL ETF TRANSACTIONS. THE SUPERVISORYREVIEWS THAT THE FIRM'S PRINCIPALS PERFORMED OF TRANSACTIONSINVOLVING NON-TRADITIONAL ETFS WERE INADEQUATE. THEY FAILED TOINCORPORATE THE COMPLEXITIES AND UNIQUE RISKS ASSOCIATED WITHTHESE SECURITIES, SUCH AS THEIR DAILY RESET AND LEVERAGEFEATURES. INSTEAD, THE FIRM'S PRINCIPALS REVIEWED NON-TRADITIONAL ETF TRANSACTIONS FOR SUITABILITY IN THE SAME MANNERTHEY REVIEWED TRADES INVOLVING THE FIRM'S OTHER SECURITIESPRODUCTS. THE FIRM MADE NO CHANGES TO ITS SUPERVISORY SYSTEMTO INCORPORATE GUIDANCE PROVIDED IN A REGULATORY NOTICE INREVIEWING ETF ACTIVITY UNTIL AUGUST 2009, WHEN IT IMPLEMENTEDWSPS FOR THE REVIEW OF NON-TRADITIONAL ETFS. THE FIRM FAILED TOEMPLOY A SYSTEM TO IDENTIFY WHICH OF THE ETFS BEING SOLD BY THEFIRM'S REGISTERED REPRESENTATIVES WERE NON-TRADITIONAL ANDTHEREFORE SUBJECT TO GREATER SCRUTINY. NEITHER THE FIRM'STRADE BLOTTERS NOR ITS GENERAL SUPERVISORY REPORTS WERECODED TO ALERT SUPERVISORS REGARDING THE LENGTH OF TIMECUSTOMERS HAD BEEN HOLDING NON-TRADITIONAL ETFS. THE FIRM'SSUPERVISORY SYSTEM WAS INADEQUATE TO DETECT AND MONITOR THEHOLDING PERIODS OF NON-TRADITIONAL ETFS IN CUSTOMER ACCOUNTS.THE FIRM DID NOT UTILIZE EXCEPTION REPORTS OR OTHERSURVEILLANCE REPORTS TO MONITOR ETF ACTIVITY SPECIFICALLYINCLUDING THE CLASSIFICATION OF ETFS AS LEVERAGED OR INVERSE.THE FIRM FAILED TO CONDUCT ANY TRAINING OR PROVIDE ANY WRITTENGUIDANCE FOR ITS REGISTERED PERSONNEL REGARDING THE SALE ANDSUPERVISION OF NON-TRADITIONAL ETFS.


Resolution:

Other Sanctions Ordered: RESTITUTION TO CUSTOMERS IN THE AMOUNT OF $287,171.75

Sanction Details: SEE ABOVE


No










Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS. THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOSUBJECT NON-TRADITIONAL EXCHANGE-TRADED FUNDS (ETFS) TO THESAME LEVEL OF REVIEW AS OTHER NEW PRODUCTS OFFERED FOR SALETO RETAIL BROKERAGE CUSTOMERS. THE FINDINGS STATED THATINSTEAD, THE FIRM ALLOWED ITS REGISTERED REPRESENTATIVES TORECOMMEND TO CUSTOMERS NON-TRADITIONAL ETFS WITHOUTPERFORMING REASONABLE DILIGENCE TO UNDERSTAND THE RISKS ANDFEATURES ASSOCIATED WITH IT. THE FIRM PERMITTEDREPRESENTATIVES WHO RECEIVED MINIMAL TRAINING ON NON-TRADITIONAL ETFS AND WHO FAILED TO PERFORM REASONABLEDILIGENCE TO UNDERSTAND THE RISKS AND FEATURES OF THEPRODUCT, TO RECOMMEND TO CUSTOMERS TRANSACTIONS IN NON-TRADITIONAL ETFS. BY FIALING TO EMPLOY REASONABLE DILIGENCEREGARDING NON-TRADITIONAL ETFS, THE FIRM MISSED THEOPPORTUNITY TO EVALUATE CRITICAL ASPECTS OF THESE PRODUCTSINCLUDING THE IMPLICATIONS OF THE DAILY RESET AND LEVEDRAGECOMPONENTS AND TO ESTABLISH APPROPRIATE TRAINING ANDSUPERVISION PROTOCOLS. ACCORDINGLY, THESE RECOMMENDATIONSLACKED A REASONABLE BASIS AND WERE UNSUITABLE. THE FINDINGSALSO STATED THAT SOME NON-TRADITIONAL ETFS PURCHASES THAT THEFIRM RECOMMENDED, ACTING THROUGH SEVERAL BROKERS, WEREALSO UNSUITABLE UNDER A CUSTOMER-SPECIFIC SUITABILITY THEORYAS THE RECOMMENDATIONS WERE MADE TO CUSTOMERS WITHCONSERVATIVE INVESTMENT OBJECTIVES AND/OR RISK TOLERANCES.THE PROSPECTUSES FOR THE NON-TRADITIONAL ETFS THAT THE FIRMSOLD GENERALLY ADVISED THAT THEY SHOULD NOT BE HELD MORETHAN ONE TRADING SESSION OR AS LONG-TERM INVESTMENTS.NOTWITHSTANDING THAT STATEMENT IN THE PROSPECTUSES, NON-TRADITIONAL ETFS WERE MAINTAINED IN CUSTOMER ACCOUNTS FORLONGER THAN SEVEN BUSINESS DAYS. CUSTOMERS WHO HADCONSERVATIVE INVESTMENT OBJECTIVES AND/OR RISK TOLERANCESAND WHOSE ETFS WERE HELD FOR SEVEN OR MORE DAYS, LOST MONEYON THEIR INVESTEMENTS. THESE UNSUITABLE NON-TRADITIONAL ETFRECOMMENDATIONS RESULTED IN CUSTOMER LOSSES OF $287,171.75.THE FINDINGS ALSO INCLUDED THAT THE FIRM FAILED TO ESTABLISH ANDMAINTAIN AN ADEQUATE SUPERVISORY SYSTEM, INCLUDING WRITTENSUPERVISORY PROCEDURES (WSPS), TO MONITOR AND REVIEW THESALE OF NON-TRADITIONAL ETFS TO ITS RETAIL CUSTOMERS AND THEFIRM FAILED TO ESTABLISH AND MAINTAIN SPECIFIC WSPS FOR THEREVIEW OF NON-TRADITIONAL EFT TRANSACTIONS. THE SUPERVISORYREVIEWS THAT THE FIRM'S PRINCIPALS PERFORMED OF TRANSACTIONSINVOLVING NON-TRADITONAL ETFS WERE INADEQUATE. THEY FAILED TOINCORPORATE THE COMPLEXITIES AND UNIQUE RISKS ASSOCIATED WITHTHESE SECURITIES, SUCH AS THEIR DAILY RESET AND LEVERAGEFEATURES. INSTEAD, THE FIRM'S PRINCIPALS REVIEWED NON-TRADTIONAL ETF TRANSACTIONS FOR SUITABILITY IN THE SAME MANNERTHEY REVIEWED TRADES INVOLVING THE FIRM'S OTHER SECURITIESPRODUCTS. THE FIRM MADE NO CHANGES TO ITS SUPERVISORY SYSTEMTO INCORPORATE GUIDANCE PROVIDED IN A REGULATORY NOTICE INREVIEWING ETF ACTIVITY UNTIL AUGUST 2009, WHEN IT IMPLEMENTEDWSPS FOR THE REVIEW OF NON-TRADITIONAL ETFS. THE FIRM FAILED TOEMPLOY A SYSTEM TO IDENTIFY WHICH OF THE ETFS BEING SOLD BY THEFIRM'S REGISTERED REPRESENTATIVES WERE NON-TRADITIONAL ANDTHEREFOR SUBJECT TO GREATER SCRUTINY. NEITHER THE FIRM'S TRADEBLOTTERS NOR ITS GENERAL SUPERVISORY REPORTS WERE CODED TOALERT SUPERVISORS REGARDING THE LENGTH OF TIME CUSTOMERSHAD BEEN HOLDING NON-TRADITIONAL ETFS. THE FIRM'S SUPERVISORYSYSTEM WAS INADEQUATE TO DETECT AND MONITOR HOLDING PERIODSOF NON-TRADITIONAL ETFS IN CUSTOMER ACCOUNTS. THE FIRM DID NOTUTILIZE EXCEPTION REPORTS OR OTHER SURVEILLANCE TO MONITORETF ACTIVITY SPECIFICALLY INCLUDING THE CLASSIFICATION OF ETS ASLEVERAGED OR INVERSE. THE FIRM FAILED TO CONDUCT ANY TRAININGOR PROVIDE ANY WRITTEN GUIDANCE FOR ITS REGISTERED PERSONNELREGARDING THE SALE AND SUPERVISION OF NON-TRADTIONAL ETFS.







Initiated By: FINRA


Civil and Administrative Penalt(ies) /Fine(s)


CENSURE, RESTITUTION




Other Product Type(s): EXCHANGE-TRADED FUNDS

WITHOUT ADMITTING OR DENYING THE FINDINGS. THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOSUBJECT NON-TRADITIONAL EXCHANGE-TRADED FUNDS (ETFS) TO THESAME LEVEL OF REVIEW AS OTHER NEW PRODUCTS OFFERED FOR SALETO RETAIL BROKERAGE CUSTOMERS. THE FINDINGS STATED THATINSTEAD, THE FIRM ALLOWED ITS REGISTERED REPRESENTATIVES TORECOMMEND TO CUSTOMERS NON-TRADITIONAL ETFS WITHOUTPERFORMING REASONABLE DILIGENCE TO UNDERSTAND THE RISKS ANDFEATURES ASSOCIATED WITH IT. THE FIRM PERMITTEDREPRESENTATIVES WHO RECEIVED MINIMAL TRAINING ON NON-TRADITIONAL ETFS AND WHO FAILED TO PERFORM REASONABLEDILIGENCE TO UNDERSTAND THE RISKS AND FEATURES OF THEPRODUCT, TO RECOMMEND TO CUSTOMERS TRANSACTIONS IN NON-TRADITIONAL ETFS. BY FIALING TO EMPLOY REASONABLE DILIGENCEREGARDING NON-TRADITIONAL ETFS, THE FIRM MISSED THEOPPORTUNITY TO EVALUATE CRITICAL ASPECTS OF THESE PRODUCTSINCLUDING THE IMPLICATIONS OF THE DAILY RESET AND LEVEDRAGECOMPONENTS AND TO ESTABLISH APPROPRIATE TRAINING ANDSUPERVISION PROTOCOLS. ACCORDINGLY, THESE RECOMMENDATIONSLACKED A REASONABLE BASIS AND WERE UNSUITABLE. THE FINDINGSALSO STATED THAT SOME NON-TRADITIONAL ETFS PURCHASES THAT THEFIRM RECOMMENDED, ACTING THROUGH SEVERAL BROKERS, WEREALSO UNSUITABLE UNDER A CUSTOMER-SPECIFIC SUITABILITY THEORYAS THE RECOMMENDATIONS WERE MADE TO CUSTOMERS WITHCONSERVATIVE INVESTMENT OBJECTIVES AND/OR RISK TOLERANCES.THE PROSPECTUSES FOR THE NON-TRADITIONAL ETFS THAT THE FIRMSOLD GENERALLY ADVISED THAT THEY SHOULD NOT BE HELD MORETHAN ONE TRADING SESSION OR AS LONG-TERM INVESTMENTS.NOTWITHSTANDING THAT STATEMENT IN THE PROSPECTUSES, NON-TRADITIONAL ETFS WERE MAINTAINED IN CUSTOMER ACCOUNTS FORLONGER THAN SEVEN BUSINESS DAYS. CUSTOMERS WHO HADCONSERVATIVE INVESTMENT OBJECTIVES AND/OR RISK TOLERANCESAND WHOSE ETFS WERE HELD FOR SEVEN OR MORE DAYS, LOST MONEYON THEIR INVESTEMENTS. THESE UNSUITABLE NON-TRADITIONAL ETFRECOMMENDATIONS RESULTED IN CUSTOMER LOSSES OF $287,171.75.THE FINDINGS ALSO INCLUDED THAT THE FIRM FAILED TO ESTABLISH ANDMAINTAIN AN ADEQUATE SUPERVISORY SYSTEM, INCLUDING WRITTENSUPERVISORY PROCEDURES (WSPS), TO MONITOR AND REVIEW THESALE OF NON-TRADITIONAL ETFS TO ITS RETAIL CUSTOMERS AND THEFIRM FAILED TO ESTABLISH AND MAINTAIN SPECIFIC WSPS FOR THEREVIEW OF NON-TRADITIONAL EFT TRANSACTIONS. THE SUPERVISORYREVIEWS THAT THE FIRM'S PRINCIPALS PERFORMED OF TRANSACTIONSINVOLVING NON-TRADITONAL ETFS WERE INADEQUATE. THEY FAILED TOINCORPORATE THE COMPLEXITIES AND UNIQUE RISKS ASSOCIATED WITHTHESE SECURITIES, SUCH AS THEIR DAILY RESET AND LEVERAGEFEATURES. INSTEAD, THE FIRM'S PRINCIPALS REVIEWED NON-TRADTIONAL ETF TRANSACTIONS FOR SUITABILITY IN THE SAME MANNERTHEY REVIEWED TRADES INVOLVING THE FIRM'S OTHER SECURITIESPRODUCTS. THE FIRM MADE NO CHANGES TO ITS SUPERVISORY SYSTEMTO INCORPORATE GUIDANCE PROVIDED IN A REGULATORY NOTICE INREVIEWING ETF ACTIVITY UNTIL AUGUST 2009, WHEN IT IMPLEMENTEDWSPS FOR THE REVIEW OF NON-TRADITIONAL ETFS. THE FIRM FAILED TOEMPLOY A SYSTEM TO IDENTIFY WHICH OF THE ETFS BEING SOLD BY THEFIRM'S REGISTERED REPRESENTATIVES WERE NON-TRADITIONAL ANDTHEREFOR SUBJECT TO GREATER SCRUTINY. NEITHER THE FIRM'S TRADEBLOTTERS NOR ITS GENERAL SUPERVISORY REPORTS WERE CODED TOALERT SUPERVISORS REGARDING THE LENGTH OF TIME CUSTOMERSHAD BEEN HOLDING NON-TRADITIONAL ETFS. THE FIRM'S SUPERVISORYSYSTEM WAS INADEQUATE TO DETECT AND MONITOR HOLDING PERIODSOF NON-TRADITIONAL ETFS IN CUSTOMER ACCOUNTS. THE FIRM DID NOTUTILIZE EXCEPTION REPORTS OR OTHER SURVEILLANCE TO MONITORETF ACTIVITY SPECIFICALLY INCLUDING THE CLASSIFICATION OF ETS ASLEVERAGED OR INVERSE. THE FIRM FAILED TO CONDUCT ANY TRAININGOR PROVIDE ANY WRITTEN GUIDANCE FOR ITS REGISTERED PERSONNELREGARDING THE SALE AND SUPERVISION OF NON-TRADTIONAL ETFS.


Resolution:

Other Sanctions Ordered: RESTITUTION TO CUSTOMERS IN THE AMOUNT OF $287,171.75

Sanction Details: SEE ABOVE









Disclosure 5 of 8

i


Initiated By: FINRA



Principal Product Type: Debt - Corporate

Other Product Type(s): MUNICIPAL BONDS

Allegations: SEC EXCHANGE ACT RULES 17A-3, 17A-4, FINRA RULE 2010, NASD RULES2110, 3010, 3110, MSRB RULES G-8, G-9, G-27: WITH RESPECT TO 43CORPORATE BOND TRANSACTIONS, THE FIRM FAILED TO MAINTAINADEQUATE ORDER TICKETS AS FOLLOWS: TEN OF THE ORDER TICKETSDID NOT REFLECT THE ORDER TYPE; FOUR OF THE ORDER TICKETS DIDNOT REFLECT WHETHER THE TRADE WAS SOLICITED OR UNSOLICITED;TWO OF THE ORDER TICKETS DID NOT DISCLOSE THE FIRM'S CAPACITY;AND TWO OF THE ORDER TICKETS REFLECTED A TIME OF EXECUTIONTHAT WAS BEFORE THE TIME OF ORDER ENTRY. WITH RESPECT TO 45MUNICIPAL BOND TRANSACTIONS, THE FIRM FAILED TO MAINTAINADEQUATE ORDER TICKETS AS FOLLOWS: EIGHT OF THE ORDER TICKETSDID NOT REFLECT THE ORDER TYPE; THREE OF THE ORDER TICKETS DIDNOT REFLECT WHETHER THE TRADE WAS SOLICITED OR UNSOLICITED;AND ONE ORDER TICKET REFLECTED A TIME OF EXECUTION THAT WASBEFORE THE TIME OF ORDER ENTRY. MOREOVER, THE FIRM FAILED TOMAINTAIN ITS CORPORATE AND MUNICIPAL BOND ORDER TICKETINFORMATION IN AN EASILY ACCESSIBLE PLACE FOR A PERIOD OF TWOYEARS, AS REQUIRED BY EXCHANGE ACT RULE 17A-4(B) AND MSRB RULEG-9(D). FOR EXAMPLE, THE FIRM WAS UNABLE TO PROVIDE ACOMPREHENSIVE RESPONSE TO FINRA STAFF'S REQUESTS FOR SUCHINFORMATION FOR OVER SEVEN MONTHS. IN ADDITION, THE FIRM FAILEDTO ESTABLISH AND MAINTAIN A SUPERVISORY SYSTEM, AND ESTABLISH,MAINTAIN AND ENFORCE WRITTEN SUPERVISORY PROCEDURES (WSPS),REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH CORPORATEAND MUNICIPAL BOND ORDER TICKET RECORDKEEPING AND RETENTIONREQUIREMENTS. SPECIFICALLY, THE PROCEDURES FAILED TO PROVIDEINSTRUCTION OR GUIDANCE TO FIRM PERSONNEL ON THE MANNER INWHICH REQUIRED ORDER TICKET INFORMATION WOULD BE OBTAINEDAND PRESERVED. THE FIRM DID NOT PROVIDE FOR THE ADEQUATETRAINING OF FIRM STAFF WITH RESPECT TO THE COMPREHENSIVEENTRY OF ALL REQUIRED ORDER TICKET INFORMATION AND FOR THERETRIEVAL OF THAT INFORMATION WITHIN A REASONABLE TIME FRAME.









Other


N/A



Resolution:


Sanction Details: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS;THEREFORE IT IS CENSURED AND FINED $15,000 ($7,500 OF WHICHPERTAINS TO THE VIOLATIONS OF MSRB RULES G-8, G-9 AND G-27).


No

Sanctions Ordered: CensureMonetary/Fine $15,000.00



Allegations: SEC EXCHANGE ACT RULESS 17A-3, 17A-4, FINRA RULE 2010, NASD RULES2110, 3010, 3110, MSRB RULES G-8, G-9, G-27; WITH RESPECT TO 43CORPORATE BOND TRANSACTIONS, THE FIRM FAILED TO MAINTAINADEQUATE ORDER TICKETS AS FOLLOWS: TEN OF THE ORDER TICKETSDID NOT REFLECT THE ORDER TYPE; FOUR OF THE ORDER TICKETS DIDNOT REFLECT WHETHER THE TRADE WAS SOLICITED OR UNSOLICITED;TWO OF THE ORDER TICKETS DID NOT DISCLOSE THE FIRM'S CAPACITY;AND TWO OF THE ORDER TICKETS REFLECTED A TIME OF EXECUTIONTHAT WAS BEFORE THE TIME OF ORDER ENTRY. WITH RESPECT TO 45MUNICIPAL BOND TRANSACTIONS, THE FIRM FAILED TO MAINTAINADEQUATE ORDER TICKETS AS FOLLOWS: EIGHT OF THE ORDER TICKETSDID NOT REFLECT THE ORDER TYPE; THREE OF THE ORDER TICKETS DIDNOT REFLECT WHETHER THE TRADE WAS SOLICITED OR UNSOLICITED;AND ONE ORDER TICKET REFLECTED A TIME OF EXECUTION THAT WASBEFORE THE TIME OF ORDER ENTRY. MOREOVER, THE FIRM FAILED TOMAINTAIN ITS CORPORATE AND MUNICIPAL BOND ORDER TICKETINFORMATION IN AN EASILY ACCESSIBLE PLACE FOR A PERIOD OF TWOYEARS, AS REQUIRED BY EXCHANGE ACT RULE 17A-4(B) AND MSRB RULEG-9(D). FOR EXAMPLE, THE FIRM WAS UNABLE TO PROVIDE ACOMPREHENSIVE RESPONSE TO FINRA STAFF'S REQUEST FOR SUCHINFORMATION FOR OVER SEVEN MONTHS. IN ADDITION, THE FIRM FAILEDTO ESTABLISH AND MAINTAIN A SUPERVISORY SYSTEM, AND ESTABLISH,MAINTAIN AND ENFORCE WRITTEN SUPERVISORY PROCEDURES (WSPS),REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH CORPORATEAND MUNICIPAL BOND ORDER TICKET RECORDKEEPING AND RETENTIONREQUIREMENTS. SPECIFICALLY, THE PROCEDURES FAILED TO PROVIDEINSTRUCTION OR GUIDANCE TO FIRM PERSONNEL ON THE MANNER INWHICH REQUIRED TICKET INFORMATION WOULD BE OBTAINED ANDPRESERVED. THE FIRM DID NOT PROVIDE FOR THE ADEQUATE TRAININGOF FIRM STAFF WITH RESPECT TO THE COMPREHENSIVE ENTRY OF ALLREQUIRED ORDER TICKET INFORMATION AND FOR THE RETRIEVAL OFTHAT INFORMATION WITHIN A REASONABLE TIME FRAME.







Initiated By: FINRA


Other


N/A



Principal Product Type: Debt - Corporate


SEC EXCHANGE ACT RULESS 17A-3, 17A-4, FINRA RULE 2010, NASD RULES2110, 3010, 3110, MSRB RULES G-8, G-9, G-27; WITH RESPECT TO 43CORPORATE BOND TRANSACTIONS, THE FIRM FAILED TO MAINTAINADEQUATE ORDER TICKETS AS FOLLOWS: TEN OF THE ORDER TICKETSDID NOT REFLECT THE ORDER TYPE; FOUR OF THE ORDER TICKETS DIDNOT REFLECT WHETHER THE TRADE WAS SOLICITED OR UNSOLICITED;TWO OF THE ORDER TICKETS DID NOT DISCLOSE THE FIRM'S CAPACITY;AND TWO OF THE ORDER TICKETS REFLECTED A TIME OF EXECUTIONTHAT WAS BEFORE THE TIME OF ORDER ENTRY. WITH RESPECT TO 45MUNICIPAL BOND TRANSACTIONS, THE FIRM FAILED TO MAINTAINADEQUATE ORDER TICKETS AS FOLLOWS: EIGHT OF THE ORDER TICKETSDID NOT REFLECT THE ORDER TYPE; THREE OF THE ORDER TICKETS DIDNOT REFLECT WHETHER THE TRADE WAS SOLICITED OR UNSOLICITED;AND ONE ORDER TICKET REFLECTED A TIME OF EXECUTION THAT WASBEFORE THE TIME OF ORDER ENTRY. MOREOVER, THE FIRM FAILED TOMAINTAIN ITS CORPORATE AND MUNICIPAL BOND ORDER TICKETINFORMATION IN AN EASILY ACCESSIBLE PLACE FOR A PERIOD OF TWOYEARS, AS REQUIRED BY EXCHANGE ACT RULE 17A-4(B) AND MSRB RULEG-9(D). FOR EXAMPLE, THE FIRM WAS UNABLE TO PROVIDE ACOMPREHENSIVE RESPONSE TO FINRA STAFF'S REQUEST FOR SUCHINFORMATION FOR OVER SEVEN MONTHS. IN ADDITION, THE FIRM FAILEDTO ESTABLISH AND MAINTAIN A SUPERVISORY SYSTEM, AND ESTABLISH,MAINTAIN AND ENFORCE WRITTEN SUPERVISORY PROCEDURES (WSPS),REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH CORPORATEAND MUNICIPAL BOND ORDER TICKET RECORDKEEPING AND RETENTIONREQUIREMENTS. SPECIFICALLY, THE PROCEDURES FAILED TO PROVIDEINSTRUCTION OR GUIDANCE TO FIRM PERSONNEL ON THE MANNER INWHICH REQUIRED TICKET INFORMATION WOULD BE OBTAINED ANDPRESERVED. THE FIRM DID NOT PROVIDE FOR THE ADEQUATE TRAININGOF FIRM STAFF WITH RESPECT TO THE COMPREHENSIVE ENTRY OF ALLREQUIRED ORDER TICKET INFORMATION AND FOR THE RETRIEVAL OFTHAT INFORMATION WITHIN A REASONABLE TIME FRAME.


Resolution:


Sanction Details: WITHOOUT ADMITTING OR DENYING THE FINDINGS, THE FIRMCONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OFFINDINGS; THEREFORE IT IS CENSURED AND FINED $15,000 ($7,500 OFWHICH PERTAINS TO THE VIOLATIONS OF MSRB RULES G-8, G-9, AND G-27).

Sanctions Ordered: CensureMonetary/Fine $15,000.00


Disclosure 6 of 8

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Reporting Source: Firm

Initiated By: STATE OF NEW YORK INSURANCE DEPARTMENT


Civil and Administrative Penalt(ies) /Fine(s)



Docket/Case Number: 2009-0136-S

Principal Product Type: No Product


Allegations: NEW YORK INSURANCE DEPARTMENT ALLEGED THAT FIRM FILEDINCORRECT INSURANCE LICENSE APPLICATIONS IN 2004.



Resolution:

Other Sanctions Ordered: NO OTHER SANCTIONS.

Sanction Details: PENALTY OF $2,250.00 AGAINST INSURANCE AGENCY PAID 6/01/2009.ACKNOWLEDGED AND FINALIZED BY STATE OF NEW YORK 6/02/2009.MATTER CLOSED.

Firm Statement IN APPLYING FOR INSURANCE LICENSURE IN 2004, THE FIRMINADVERTENTLY FAILED TO DISCLOSE A MATTER FROM 1996 ANDANOTHER MATTER CONCERNING ONE INDIVIDUAL OF WHICH THE FIRMHAD NO NOTICE. THE FIRM VOLUNTARILY DISCLOSED THE INADVERTENTOVERIGHT. STIPULATION ENTERED INTO TO RESOLVE THE MATTERWITHOUT FURTHER COST TO THE FIRM.

Sanctions Ordered: Monetary/Fine $2,250.00

Stipulation and Consent

Disclosure 7 of 8

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Allegations: THE RESPONDENT ACTED AS A DEALER IN THE STATE OF ILLINOISWITHOUT BEING PROPERLY REGISTERED IN VIOLATION OF SECTION 12.AAND 12.C OF THE ILLINOIS SECURITIES LAW. RESPONDENT'SAPPLICATION FOR REGISTRATION AS A DEALER IN THE STATE OF ILLINOISIS SUBJECT TO DENIAL PURSUANT TO SECTION 8.E.(1)(G) OF THE ILLINOISSECURITIES LAW.







Initiated By: ILLINOIS


Other




URL for Regulatory Action:



THE RESPONDENT ACTED AS A DEALER IN THE STATE OF ILLINOISWITHOUT BEING PROPERLY REGISTERED IN VIOLATION OF SECTION 12.AAND 12.C OF THE ILLINOIS SECURITIES LAW. RESPONDENT'SAPPLICATION FOR REGISTRATION AS A DEALER IN THE STATE OF ILLINOISIS SUBJECT TO DENIAL PURSUANT TO SECTION 8.E.(1)(G) OF THE ILLINOISSECURITIES LAW.


Resolution:

Other Sanctions Ordered: THE RESPONDENT WAS FINED IN THE AMOUNT OF SIX THOUSAND FIVEHUNDRED DOLLARS, PAYABLE TO THE OFFICE OF THE SECRETARY OFSTATE AUDIT AND ENFORCEMENT FUND AND ON AUGUST 17, 2007 HASSUBMITTED PAYMENT THEREOF.

Sanction Details: THE RESPONDENT ALSO PAID BACK REGISTRATION FEES

Regulator Statement IF YOU HAVE ANY QUESTIONS PLEASE CALL DAN TUNICK AT 312-793-3384.


No


Order


Initiated By: STATE OF ILLINOIS SECRETARY OF STATE SECURITIES DEPARTMENT


Allegations: THE RESPONDENT ACTED AS A DEALER IN THE STATE OF ILLINOISWITHOUT BEING PROPERLY REGISTERED IN VIOLATION OF SECTION 12.AAND 12.C OF THE ILLINOIS SECURITIES LAW.








Other







Resolution:


Sanction Details: TOTAL AMOUNT $10,100 INCLUDING $6,500 CHARACTERIZED AS A FINE AND$3,600 CHARACTERIZED AS BACK REGISTRATION FEES. NO OTHERSANCTION. MATTER CLOSED.

Firm Statement THE FIRM ENTERED INTO A CONSENT ORDER WITH THE STATE OFILLINOIS REGARDING THE INADVERTENT PERFORMANCE OF CERTAINSECURITIES ACTIVITIES IN THE STATE OF ILLINOIS, GENERALLYINVOLVING CLIENTS WHO RELOCATED TO ILLINOIS FROM STATES INWHICH THE FIRM WAS REGISTERED. THE FIRM ENTERED INTO ASTIPULATION AND PAID A STIPULATED SUM OF $10,100.00, $6,500.00 OFWHICH WAS CHARACTERIZED AS A FINE AND $3,600.00 OF WHICH WASCHARACTERIZED AS BACK REGISTRATION FEES.



Disclosure 8 of 8

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Initiated By: CONNECTICUT DEPT. OF BANKING


Docket/Case Number: ST-96-2897-S

Allegations: FROM APPROXIMATELY 1/94, THE FIRM ALLEGEDLYTRANSACTED BUSINESS FROM 1 OR MORE CONNECTICUT LOCATIONSWITHOUT REGISTERING THOSE LOCATIONS AS BRANCH OFFICES UNDERTHECONNECTICUT UNIFORM SECURITIES ACT.









URL for Regulatory Action:

Principal Product Type:



Resolution:


Sanction Details: STIPULATION AND AGREEMENT EXECUTED 4/1/96,PURSUANT TO WHICH THE FIRM AGREED TO PAY A $500 FINE ANDREIMBURSE THE DEPT. AN ADDITIONAL $500 FOR INVESTIGATIVE COSTS. IN ADDITION, THE STIPULATION AND AGREEMENT REQUIRED THAT THEFIRM RETAIN AN INDEPENDENT CONSULTANT EXPERIENCED INSECURITIESLAW TO REVIEW THE FIRM'S SUPERVISORY PROCEDURES & PREPARE AWRITTEN REPORT THEREON; IT WOULD BE INCUMBENT ON THE FIRM TOIMPLEMENT THE CONSULTANT'S RECOMMENDATIONS OR REPORT BACKTOTHE DEPT. CONCERNING WHY ANY RECOMMENDATIONS WERE NOTIMPLEMENTED. STIPULATION AND AGREEMENT ALSO REQUIRED ROBERTFRANCIS BRAWDERS (CRD 1091922) AND LAWRENCE THOMAS MCHUGH(CRD1086477), PRINCIPALS OF THE FIRM TO COMPLETE THE REGULATORYELEMENT OF THE SECURITIES INDUSTRY CONTINUING EDUCATIONPROGRAMWITHIN 90 DAYS OF 4/1/96. IN ADDITION, THE STIPULATION ANDAGREEMENT REQUIRED THAT, IN SUPERVISING ROGER HELAL (CRD1080346), THE FIRM SHOULD ENSURE THAT HELAL NOT SUPERVISE OTHERFIRM REPRESENTATIVES ABSENT DEPT. CONSENT, THAT HELAL'SACTIVITIES BE SUPERVISED BY THE COMPLIANCE DIRECTOR, AND THATHEHAL ONLY BE RESPONSIBLE FOR PROVIDING SECURITIES BROKERAGESERVICES AT ONE FINANCIAL INSTITUTION AT A TIME. THESTIPULATION AND AGREEMENT CONTAINED OTHER PROVISIONSREQUIRINGTHAT FIRM MANAGERS PASS A PRINCIPAL'S EXAM WITHIN 90 DAYS OFAPPOINTMENT (AND BE SUBJECT TO SUPERVISION BY A BACKUPMANAGERIN THE INTERIM), AND THAT THE FIRM REPORT PERIODICALLY TO THEDEPT. FOR 2 YEARS ON ANY SECURITIES-RELATED COMPLAINTS, ACTIONSOR PROCEEDINGS.

Sanctions Ordered: Monetary/Fine $500.00







STIPULATION AND AGREEMENT EXECUTED 4/1/96,PURSUANT TO WHICH THE FIRM AGREED TO PAY A $500 FINE ANDREIMBURSE THE DEPT. AN ADDITIONAL $500 FOR INVESTIGATIVE COSTS. IN ADDITION, THE STIPULATION AND AGREEMENT REQUIRED THAT THEFIRM RETAIN AN INDEPENDENT CONSULTANT EXPERIENCED INSECURITIESLAW TO REVIEW THE FIRM'S SUPERVISORY PROCEDURES & PREPARE AWRITTEN REPORT THEREON; IT WOULD BE INCUMBENT ON THE FIRM TOIMPLEMENT THE CONSULTANT'S RECOMMENDATIONS OR REPORT BACKTOTHE DEPT. CONCERNING WHY ANY RECOMMENDATIONS WERE NOTIMPLEMENTED. STIPULATION AND AGREEMENT ALSO REQUIRED ROBERTFRANCIS BRAWDERS (CRD 1091922) AND LAWRENCE THOMAS MCHUGH(CRD1086477), PRINCIPALS OF THE FIRM TO COMPLETE THE REGULATORYELEMENT OF THE SECURITIES INDUSTRY CONTINUING EDUCATIONPROGRAMWITHIN 90 DAYS OF 4/1/96. IN ADDITION, THE STIPULATION ANDAGREEMENT REQUIRED THAT, IN SUPERVISING ROGER HELAL (CRD1080346), THE FIRM SHOULD ENSURE THAT HELAL NOT SUPERVISE OTHERFIRM REPRESENTATIVES ABSENT DEPT. CONSENT, THAT HELAL'SACTIVITIES BE SUPERVISED BY THE COMPLIANCE DIRECTOR, AND THATHEHAL ONLY BE RESPONSIBLE FOR PROVIDING SECURITIES BROKERAGESERVICES AT ONE FINANCIAL INSTITUTION AT A TIME. THESTIPULATION AND AGREEMENT CONTAINED OTHER PROVISIONSREQUIRINGTHAT FIRM MANAGERS PASS A PRINCIPAL'S EXAM WITHIN 90 DAYS OFAPPOINTMENT (AND BE SUBJECT TO SUPERVISION BY A BACKUPMANAGERIN THE INTERIM), AND THAT THE FIRM REPORT PERIODICALLY TO THEDEPT. FOR 2 YEARS ON ANY SECURITIES-RELATED COMPLAINTS, ACTIONSOR PROCEEDINGS.

Regulator Statement CONTACT: C. ANTANAITIS, 860-240-8233.


Initiated By: CONNECTICUT DEPARTMENT OF BANKING


Other



Docket/Case Number: ST-96-2897-S

Principal Product Type: No Product


Allegations: FROM APPROXIMATELY 1/94, THE FIRM ALLEGEDLY TRANSACTEDBUSINESS FROM ONE OR MORE CONNECTICUT LOCATIONS WITHOUTREGISTERING THESE LOCATIONS AS BRANCH OFFICES UNDER THECONNECTICUT UNIFORM SECURITIES ACT.



Resolution:


Sanction Details: STIPULATION AND AGREEMENT EXECUTED 4/1/1996 PURSUANT TO WHICHTHE FIRM AGREED TO PAY A $500 FINE AND REIMBURSE THE DEPT. ANADDITIONAL $500 FOR INVESTIGATIVE COSTS. IN ADDITION, THESTIPULATION & AGREEMENT REQUIRED THAT THE FIRM RETAIN ANINDEPENDENT CONSULTANT EXPERIENCED IN SECURITIES LAW TOREVIEW THE FIRM'S SUPERVISORY PROCEDURES AND PREPARE AWRITTEN REPORT THEREON; IT WOULD BE INCUMBENT ON THE FIRM TOIMPLEMENT THE CONSULTANT'S RECOMMENDATIONS OR REPORT BACKTO THE DEPT. CONCERNING WHY ANY RECOMMENDATIONS WERE NOTIMPLEMENTED. STIPULATION & AGREEMENT ALSO REQUIRED ROBERTFRANCIS BRAWDERS, JR. (CRD 1091922) AND LAWRENCE THOMASMCHUGH (CRD 1086477), PRINCIPALS OF THE FIRM, TO COMPLETE THEREGULATORY ELEMENT OF THE SECURITIES INDUSTRY CONTINUINGEDUCATION PROGRAM WITHIN 90 DAYS OF 4/1/1996. IN ADDITION, THESTIPULATION & AGREEMENT REQUIRED THAT, IN SUPERVISING ROGERHELAL (CRD 1080346), THE FIRM SHOULD ENSURE THAT HELAL NOTSUPERVISE OTHER FIRM REPRESENTATIVES ABSENT DEPT. CONSENT,THAT HELAL'S ACTIVITIES BE SUPERVISED BY THE COMPLIANCEDIRECTOR, AND THAT HELAL ONLY BE RESPONSIBLE FOR PROVIDINGSECURITIES BROKERAGE SERVICES AT ONE FINANCIAL INSTITUTION AT ATIME. THE STIPULATION & AGREEMENT CONTAINED OTHER PROVISIONSREQUIRING THAT FIRM MANAGERS PASS A PRINCIPAL'S EXAM WITHIN 90DAYS OF APPOINTMENT (AND BE SUBJECT TO SUPERVISION BY A BACKUPMANAGER IN THE INTERIM), AND THAT THE FIRM REPORT PERIODICALLYTO THE DEPT. FOR TWO YEARS ON ANY SECURITIES-RELATEDCOMPLAINTS, ACTIONS, OR PROCEEDINGS.

Sanctions Ordered: Monetary/Fine $500.00







STIPULATION AND AGREEMENT EXECUTED 4/1/1996 PURSUANT TO WHICHTHE FIRM AGREED TO PAY A $500 FINE AND REIMBURSE THE DEPT. ANADDITIONAL $500 FOR INVESTIGATIVE COSTS. IN ADDITION, THESTIPULATION & AGREEMENT REQUIRED THAT THE FIRM RETAIN ANINDEPENDENT CONSULTANT EXPERIENCED IN SECURITIES LAW TOREVIEW THE FIRM'S SUPERVISORY PROCEDURES AND PREPARE AWRITTEN REPORT THEREON; IT WOULD BE INCUMBENT ON THE FIRM TOIMPLEMENT THE CONSULTANT'S RECOMMENDATIONS OR REPORT BACKTO THE DEPT. CONCERNING WHY ANY RECOMMENDATIONS WERE NOTIMPLEMENTED. STIPULATION & AGREEMENT ALSO REQUIRED ROBERTFRANCIS BRAWDERS, JR. (CRD 1091922) AND LAWRENCE THOMASMCHUGH (CRD 1086477), PRINCIPALS OF THE FIRM, TO COMPLETE THEREGULATORY ELEMENT OF THE SECURITIES INDUSTRY CONTINUINGEDUCATION PROGRAM WITHIN 90 DAYS OF 4/1/1996. IN ADDITION, THESTIPULATION & AGREEMENT REQUIRED THAT, IN SUPERVISING ROGERHELAL (CRD 1080346), THE FIRM SHOULD ENSURE THAT HELAL NOTSUPERVISE OTHER FIRM REPRESENTATIVES ABSENT DEPT. CONSENT,THAT HELAL'S ACTIVITIES BE SUPERVISED BY THE COMPLIANCEDIRECTOR, AND THAT HELAL ONLY BE RESPONSIBLE FOR PROVIDINGSECURITIES BROKERAGE SERVICES AT ONE FINANCIAL INSTITUTION AT ATIME. THE STIPULATION & AGREEMENT CONTAINED OTHER PROVISIONSREQUIRING THAT FIRM MANAGERS PASS A PRINCIPAL'S EXAM WITHIN 90DAYS OF APPOINTMENT (AND BE SUBJECT TO SUPERVISION BY A BACKUPMANAGER IN THE INTERIM), AND THAT THE FIRM REPORT PERIODICALLYTO THE DEPT. FOR TWO YEARS ON ANY SECURITIES-RELATEDCOMPLAINTS, ACTIONS, OR PROCEEDINGS.






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