Initiated By
FINRA
Allegations
FINRA RULES 2010, 3310(A) AND (E), NASD RULES 2110, 3010(A), 3010(C), 3010(D), 3011(A) AND (E), 3012(A), 3110(A): HALL MEMBER FIRM'S ANTI-MONEY LAUNDERING (AML) PROGRAM REQUIRED HIM TO MONITOR FOR POTENTIALLY SUSPICIOUS ACTIVITY AND AML RED FLAGS, INVESTIGATE POTENTIALLY SUSPICIOUS ACTIVITY AND REPORT SUSPICIOUS ACTIVITY BY FILING A SUSPICIOUS ACTIVITY REPORT (SAR), AS APPROPRIATE. THE FIRM, ACTING THROUGH HALL, FAILED TO ADEQUATELY MONITOR ACTIVITY IN CERTAIN OF ITS CUSTOMERS' ACCOUNTS. IN PARTICULAR, THE FIRM'S AML PROCEDURES INCLUDED A LIST OF RED FLAGS THAT ARE POTENTIAL INDICIA OF SUSPICIOUS ACTIVITY. THE FIRM, ACTING THROUGH HALL, FAILED TO ADEQUATELY SUPERVISE AND MONITOR ACTIVITY, AND REPORT IT ON A SAR, IF NECESSARY, WHERE THE FIRM RECEIVED STOCK CERTIFICATES FROM THIRD PARTIES INTO A CUSTOMER'S ACCOUNT IN THE NAMES OF THE THIRD PARTIES, THEN WERE LIQUIDATED, AND TRANSFERRED OUT OF THOSE ACCOUNTS. THE FIRM HAD A NUMBER OF FOREIGN ASSOCIATES AND PROCESSED A SIGNIFICANT AMOUNT OF WIRES ORIGINATING FROM CLIENTS IN SOUTH AMERICA. IN CERTAIN INSTANCES, THE FIRM, ACTING THROUGH HALL, DID NOT ADEQUATELY INVESTIGATE AND MONITOR SOME OF THE WIRES FOR SUSPICIOUS ACTIVITY OR REPORT IT, IF NECESSARY. EVEN THOUGH A WIRE TRANSFER, BY A CUSTOMER, PURPORTEDLY TO A THIRD PARTY, WAS TO AN UNRELATED THIRD PARTY AND THE CUSTOMER'S EXPLANATION WAS INCONSISTENT WITH HIS STATED BUSINESS PURPOSE AND THE FACTS, THE FIRM, ACTING THROUGH HALL, PERMITTED THE ACTIVITY TO CONTINUE AND FAILED TO REPORT IT ON A SAR, IF NECESSARY. IN ANOTHER INSTANCE, ONE OF THE FIRM'S CUSTOMERS, OVER THE COURSE OF APPROXIMATELY ONE YEAR, DEPOSITED $2 MILLION INTO HIS ACCOUNT AND SUBSEQUENTLY TRANSFERRED THOSE FUNDS THROUGH SEVERAL WIRE TRANSFERS TO VARIOUS THIRD PARTY BANK ACCOUNTS, BUT HE ONLY CONDUCTED TWO SECURITIES TRANSACTIONS. THE FIRM, ACTING THROUGH HALL, PERMITTED THE ACTIVITY TO CONTINUE AND FAILED TO REPORT IT ON A SAR, IF NECESSARY. ALSO, EVEN THOUGH A CUSTOMER STILL LIMITED PART OF A WIRE TRANSFER BELOW THE $10,000 THRESHOLD, THE GOVERNMENT REPORTING REQUIREMENT THRESHOLD, WHEN HE HAD EARLIER ATTEMPTED TO KEEP BOTH SIMULTANEOUS DISBURSEMENTS SLIGHTLY BELOW THE THRESHOLD THAT SHOULD HAVE CAUSED A GOVERNMENT REPORTING REQUIREMENT FOR CASH TRANSACTIONS WITHOUT EXPLAINING WHY, BUT, THE FIRM, ACTING THROUGH HALL, PERMITTED THE ACTIVITY TO CONTINUE AND FAILED TO REPORT IT ON A SAR, IF NECESSARY. THE FIRM, ACTING THROUGH HALL, DID NOT IMPLEMENT AN ADEQUATE EMPLOYEE AML TRAINING PROGRAM. THE FIRM, ACTING THROUGH HALL, DID NOT HAVE SUPERVISORY PROCEDURES TO ADEQUATELY REVIEW AND MONITOR THE CONTENT OF AN INVESTMENT RELATED RADIO SHOW BROADCASTED BY ITS REPRESENTATIVE. THE FIRM'S WRITTEN SUPERVISORY PROCEDURES (WSPS) REQUIRED A REGISTERED PRINCIPAL TO SIGN ALL NEW ACCOUNT FORMS, BUT IT FAILED TO PROPERLY ACT ACCORDINGLY. THE FIRM, ACTING THROUGH HALL, FAILED TO DETECT AND CORRECT THIS INAPPROPRIATE ACTIVITY. THE FIRM'S REGISTERED REPRESENTATIVE SOLD A PRIVATE PLACEMENT OUTSIDE OF THE FIRM. THE FIRM, HOWEVER, DID NOT RECOGNIZE THAT THE REPRESENTATIVE SOLD ONE PRIVATE PLACEMENT OF HIS OUTSIDE BUSINESS THAT WAS ACTUALLY A PRIVATE SECURITIES TRANSACTION. THE FIRM, ACTING THROUGH HALL, THEREFORE, FAILED TO OBTAIN FURTHER INFORMATION ABOUT THE SALE, WHICH WAS NECESSARY TO REVIEW AND APPROVE THE SALE AND TO SUPERVISE IT AS A PRIVATE SECURITIES TRANSACTION. THE FIRM, ACTING THROUGH HALL, ASSIGNED A REGISTERED REPRESENTATIVE'S SPOUSE IN A BRANCH OFFICE TO SUPERVISE HER HUSBAND'S ACTIVITY; A POTENTIAL CONFLICT OF INTEREST BECAUSE THE SUPERVISORY PRINCIPAL WAS APPROVING TRANSACTIONS IN WHICH SHE MAY HAVE HAD AN ECONOMIC INTEREST. THE FIRM, ACTING THROUGH HALL, FAILED TO DESIGNATE AN APPROPRIATE REGISTERED PRINCIPAL IN ITS DALLAS OFFICE OF SUPERVISORY JURISDICTION (OSJ) TO CARRY OUT THE SUPERVISORY RESPONSIBILITIES ASSIGNED TO THAT OFFICE. (CONT. IN COMMENT)
Resolution
Acceptance, Waiver & Consent(AWC)
Sanctions
Civil and Administrative Penalty(ies)/Fine(s)
Amount
$20,000.00
Sanctions
Suspension
Registration Capacities Affected
ALL SUPERVISORY CAPACITIES
Duration
THREE MONTHS
Start Date
10/21/2013
End Date
1/20/2014
Regulator Statement
THE FIRM, ACTING THROUGH HALL, FAILED TO CONDUCT ANNUAL AUDITS AT ONE OF ITS OSJ BRANCH OFFICES. THE FIRM, ACTING THROUGH HALL, HAD WRITTEN INSPECTION REPORTS FOR ITS OSJS THAT FAILED TO INCLUDE THE TESTING AND VERIFICATION OF THE FIRM'S SUPERVISORY POLICIES AND PROCEDURES REGARDING VALIDATION OF CUSTOMER ADDRESS CHANGES AND VALIDATION OF CHANGES IN CUSTOMER ACCOUNT INFORMATION. THE FIRM, ACTING THROUGH HALL, ALLOWED ITS REPRESENTATIVES AND SUPERVISORS TO USE OUTSIDE EMAIL ADDRESSES TO SEND ELECTRONIC COMMUNICATIONS RELATED TO THE FIRM'S SECURITIES BUSINESS. HOWEVER, THE FIRM, ACTING THROUGH HALL, FAILED TO ENSURE THAT THESE OUTSIDE EMAILS WERE FORWARDED OR ADDRESSED TO AN EMAIL ADDRESS WITH THE FIRM'S DOMAIN NAME, RETAINED ON THE FIRM'S EMAIL SYSTEM, AND REVIEWED. THE FIRM DESIGNATED HALL AS THE PRINCIPAL RESPONSIBLE FOR TESTING THE FIRM'S SUPERVISORY PROCEDURES. HOWEVER, THE FIRM AND HALL, FAILED TO TIMELY PERFORM THE REQUIRED TESTING IN TWO ANNUAL PERIODS.
WITHOUT ADMITTING OR DENYING THE FINDINGS, HALL CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE, HE IS FINED $20,000 AND SUSPENDED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ALL SUPERVISORY CAPACITIES FOR THREE MONTHS. THE SUSPENSION IS IN EFFECT FROM OCTOBER 21, 2013, THROUGH JANUARY 20, 2014.
Fine paid in full on November 18, 2015.
Broker Comment
WITHOUT ADMITTING OR DENYING ANY OF THE FINDINGS, HALL CONSENTED TO THE SANCTIONS AND ENTRY OF THE FINDINGS.