Initiated By
FINRA
Allegations
Rigby was named a respondent in a FINRA complaint alleging that he failed to reasonably supervise a registered representative at his member firm in connection with the registered representative's trading of mutual fund shares in customer accounts at the firm. The complaint alleges that while under Rigby's direct supervision, the registered representative executed sets of mutual fund switch transactions in customer accounts. These sets of transactions were flagged by a firm system that functioned as an electronic trade blotter, and Rigby was required to review and approve each of the flagged transactions. Rigby failed to take reasonable steps to adequately review and follow up on the flagged trades prior to approving the trades. Despite the presence of multiple switch transactions concentrated in customer accounts, Rigby failed to contact any of the registered representative's customers to inquire about the reasons for the switch transactions, or to ensure that the customers understood the consequences of the switch transactions, including the additional charges associated with switching from one fund family to another. Rigby failed to obtain any Switch Letters for the sets of transactions. A Switch Letter is required for all switches from one mutual fund family to another mutual fund family. These required Switch Letters would have contained customer acknowledgments of the consequences of the switch transactions, including the sales charges incurred, and were to be retained with the record of the customer's order or in a file for the customer. Rigby did not request or review additional documentation from his supervisor or from firm compliance to adequately understand and supervise the transactions. Rigby also failed to question the fact that most of the referenced transactions were marked as "unsolicited," despite his belief that the transactions likely were solicited by the registered representative. Rigby did not notice the majority of the registered representative's trades were marked as "unsolicited" and failed to discuss this issue with the registered representative to determine whether the designation was accurate and whether additional follow up was necessary on his part to adequately supervise the registered representative's mutual fund switching in these customer accounts.
Resolution
Decision & Order of Offer of Settlement
Sanctions
Civil and Administrative Penalty(ies)/Fine(s)
Amount
$5,000.00
Sanctions
Suspension
Registration Capacities Affected
All principal capacities
Duration
15 business days
Start Date
3/21/2016
End Date
4/11/2016
Regulator Statement
Without admitting or denying the allegations, Rigby consented to the sanctions and to the entry of findings that he failed to take reasonable steps to adequately review and follow up on flagged trades prior to approving them. The findings stated that although Rigby spoke with the registered representative who executed these trades, which were sets of mutual fund switch transactions, Rigby failed to contact any of the registered representative's customers to inquire about the reasons for the switch transactions, or to ensure that the customers understood the consequences of the switch transactions, including the additional charges associated with switching from one fund family to another, despite the presence of multiple switch transactions concentrated in customer accounts. Rigby also failed to obtain any Switch Letters for the transactions. A Switch Letter is required for all switches from one mutual fund family to another mutual fund family. Rigby failed to question the fact that most of the referenced transactions were marked as "unsolicited," despite his belief that the transactions likely were solicited by the registered representative. Rigby did not notice the majority of the registered representative's trades were marked as "unsolicited" and failed to discuss this issue with the registered representative to determine whether the designation was accurate and whether additional follow up was necessary on his part to adequately supervise the registered representative's mutual fund switching in these customer accounts.
Broker Comment
On March 14, 2016, Mr. Rigby reached a settlement with FINRA, the organization that regulates broker-dealers. FINRA contended that while serving as a branch manager at a broker-dealer, Mr. Rigby failed reasonably to supervise a representative in connection with trading of mutual fund shares. Without admitting or denying the allegations, Mr. Rigby consented to an order by FINRA that suspends him from supervisory capacities for 15 business days and requires he pay a fine of $5,000 if he ever chooses to work for a broker-dealer in the future. These sanctions have no affect on him in his current capacities as owner and representative of an SEC registered investment adviser.