The Financial Industry Regulatory Authority (FINRA) informed about imposing sanctions on three US companies: US broker-dealer H. Beck, Inc.; LaSalle St. Securities, LLC; independent brokerage and investment banking firm J.P. Turner & Company, LLC, fined with $425,000, $175,000 and $100,000, respectively, for inadequate supervision of consolidated reports provided to customers and other violations.
Routine examinations of FINRA found that numerous registered representatives of the above-mentioned firms prepared and disseminated consolidated reports to customers either without adequate review or any prior review by a principal.
A consolidated report provides information regarding most or all of a customer’s financial holdings, regardless of where those assets are held. Consolidated reports supplement, but do not replace official customer account statements required by FINRA rules and disseminated through a separate process.
FINRA Regulatory Notice 10-19 defines consolidated reports of companies, that they have to be clear, accurate and not misleading, and if not rigorously supervised, they can raise a number of regulatory concerns, including the potential for communicating inaccurate, confusing or misleading information to customers, lapses in supervisory controls, and the use of these reports for fraudulent or unethical purposes. The Notice also stresses that if a firm is unable to adequately supervise the use of the reports, it must prohibit their dissemination and take steps to ensure that registered representatives comply with the prohibition.
