FINRA

FINRA RULES 2010, 2330(D), NASD RULES 2110, 2330(D), 3010 - DOUGLAS HALL'S MEMBER FIRM FAILED TO HAVE IN PLACE A SUPERVISORY SYSTEM REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH APPLICABLE SECURITIES LAWS, PROCEDURES AND NASD RULES WITH RESPECT TO VARIABLE ANNUITY (VA) TRANSACTIONS OF FIELD OFFICE OF SUPERVISORY JURISDICTION (OSJ) SUPERVISORS. THE FIRM PERMITTED SUCH SUPERVISORS TO SELF-APPROVE THEIR OWN SALE OF VAS AND ITS SYSTEM OF POST-TRANSACTION REVIEW WAS INADEQUATE. THE POST-TRANSACTION SYSTEM DELEGATED TO A PRINCIPAL THE RESPONSIBILITY FOR REVIEWING AND APPROVING VA SALES WHILE FAILING TO PROVIDE EFFECTIVE GUIDANCE, PROCEDURES AND TOOLS AS TO HOW THE REVIEWS WERE TO BE CONDUCTED AND FAILING TO EFFECTIVELY AUDIT THE PROCESS. THE FIRM ALSO DID NOT HAVE ANY SUPERVISORY SYSTEMS TO MONITOR, DETECT OR IDENTIFY POTENTIALLY UNSUITABLE OR OTHERWISE VIOLATIVE VA TRANSACTIONS AND EXCHANGES. THE FIRM ASSIGNED THE HOME OFFICE OSJ SUPERVISOR POSITION TO A PRINCIPAL WHO THE FIRM DID NOT EFFECTIVELY EVALUATE OR TRAIN TO UNDERTAKE THE RESPONSIBILITIES OF THE POSITION. THE SYSTEM WAS NOT REASONABLY DESIGNED TO ENSURE THAT VAS WERE SOLD TO CUSTOMERS FOR WHOM THE PRODUCT WAS SUITABLE. AS THE FIRM'S COMPLIANCE OFFICER (CCO), HALL WAS RESPONSIBLE FOR MONITORING THE COMPLIANCE OF THE FIRM'S POLICIES AND PROCEDURES, INCLUDING WITH RESPECT TO THE SUPERVISION OF VA TRANSACTIONS, WITH NASD AND FINRA RULES AND OTHER APPLICABLE LAWS AND REGULATIONS. HE WAS THE PRINCIPAL RESPONSIBLE FOR IMPLEMENTING AND REVIEWING THE FIRM'S SYSTEM OF SUPERVISION OF VA TRANSACTIONS AND DETERMINING IF IT CONFORMED TO APPLICABLE REGULATIONS; HALL FAILED TO REASONABLY CARRY OUT HIS RESPONSIBILITY. THE FIRM'S WRITTEN SUPERVISORY PROCEDURES (WSPS) FAILED TO MAKE REFERENCE TO THE HOME OFFICE OSJ SUPERVISOR'S POSITION AND DUTIES AND FAILED TO ADEQUATELY DESCRIBE HOW SHE WAS TO UNDERTAKE AND EFFECTUATE THE REVIEW OF SALES OF VAS BY FIELD OSJ SUPERVISORS. HALL WAS RESPONSIBLE FOR MONITORING THE REVIEW OF THE FIRM'S WSPS AND DID NOT REASONABLY CARRY OUT THIS RESPONSIBILITY. THE FIRM REVISED ITS WSPS WITH RESPECT TO VA SALES TO COMPLY WITH FINRA RULE 2330 BUT THE REVISIONS CONTINUED TO PERMIT FIELD OSJ SUPERVISORS TO APPROVE THEIR OWN SALE OF VAS, AND DID NOT BRING THE FIRM INTO COMPLIANCE WITH THE RULE'S REQUIREMENT THAT ALL CUSTOMER VA APPLICATIONS RECEIVE PRINCIPAL REVIEW AND APPROVAL PRIOR TO TRANSMISSION TO THE INSURANCE CARRIERS. HALL LED THE FIRM'S EFFORTS TO FORMULATE AND OBTAIN APPROVAL OF POLICIES, PRACTICES AND PROCEDURES TO ADDRESS THE NEW PROVISIONS OF FINRA RULE 2330. HE SPECIFIED WITHIN THOSE PROCEDURES THAT FIELD OSJ SUPERVISORS COULD CONTINUE TO APPROVE THEIR OWN BUSINESS. IN CONTRAVENTION OF THE RULE, THE PROCEDURES PERMITTED THE TRANSMISSION OF VA TRANSACTION PAPERWORK TO THE INSURANCE CARRIERS WITHOUT OBTAINING PRIOR PRINCIPAL REVIEW AND APPROVAL. THE FIRM'S PROCEDURES CONTINUED TO STIPULATE THAT FIELD OSJ SUPERVISORS COULD SELF-APPROVE THEIR OWN TRANSACTIONS ON BEHALF OF THE FIRM.

Acceptance, Waiver & Consent(AWC)

Censure

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

$15,000.00

WITHOUT ADMITTING OR DENYING THE FINDINGS, HALL CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE, HE IS CENSURED AND FINED $15,000. FINE PAID IN FULL ON 08/13/2012.

WITHOUT ADMITTING OR DENYING THE FINDINGS, HALL CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE, HE IS CENSURED AND FINED $15,000.