Firms Fined, Individuals Sanctioned Reported for October 2015

1 1 disciplinary and Other FINRA ActionsFirms Fined, Individuals SanctionedBraymen, Lambert and Noel Securities, Ltd. (CRD #124902, San Antonio, Texas) and Shannon Braymen (CRD #2099783, San Antonio, Texas) submitted a Letter of Acceptance, Waiver and Consent (AWC) in which the firm was censured and fined $70,000. Ms. Braymen was fined $20,000 and suspended from association with any FINRA member in any principal capacity for one month. Without admitting or denying the findings, the firm and Ms. Braymen consented to the sanctions and to the entry of findings that the firm, acting through Ms. Braymen, failed to supervise its private placement securities business and the activities of registered representatives located in two of its branch offices.

2 The findings stated that the firm, acting through Ms. Braymen, failed to register those two branch office locations. The findings also stated that the firm, acting through Ms. Braymen, failed to conduct and/or to adequately document several branch office inspections. Specifically, the firm inspected five branch offices, but failed to document the inspections. The firm s documentation failed to document the testing and verification of its policies and procedures. In addition, the firm and Ms. Braymen failed to maintain a schedule for compliance inspections of its non-branch offices and had inadequate supervisory systems and written supervisory procedures (WSPs) regarding scheduling such inspections. The findings also included that the firm, acting through Ms.

3 Braymen, failed to capture, review and retain certain email correspondence, and failed to enforce its WSPs regarding documenting reviews of other email suspension is in effect from September 21, 2015, through October 20, 2015. (FINRA Case #2011025610501)Signator Investors, Inc. (CRD #468, Boston, Massachusetts) and Gregory Joseph Mitchell (CRD #864670, Loudon, Tennessee) submitted an AWC in which the firm was censured and fined $450,000. Mitchell was assessed a deferred fine of $10,000 and suspended from association with any FINRA member in any supervisory capacity for seven months. Without admitting or denying the findings, the firm and Mitchell consented to the sanctions and to the entry of findings that the firm failed to establish, maintain and enforce a reasonable supervisory system, including WSPs, regarding its registered representatives use of consolidated reports.

4 The findings stated that Mitchell failed to enforce the firm s policies and procedures related to client file reviews and branch audits by providing advance notice of which client files would be reviewed, as well as advance notice of unannounced branch audits to registered representatives. The firm made a consolidated reporting system available to FINRA has taken disciplinary actions against the following Firms and Individuals for violations of FINRA rules; federal securities laws, rules and regulations; and the rules of the Municipal Securities Rulemaking Board (MSRB). Reported for October 20152 disciplinary and Other FINRA Actions erOas2l8 7 its registered representatives that allowed the representatives to enter customized values for assets and accounts held away from the firm into a consolidated report.

5 However, the firm did not have an adequate supervisory system to review the reports, including the accuracy of manually entered valuations provided to the customers. The firm s procedures did not contain any reference to, or discussion of, supervising consolidated reports or the use of the system. In fact, the firm did not have a review process for the consolidated reports. The lack of procedures led to confusion among firm supervisors regarding who was responsible for reviewing the consolidated findings also stated that the firm failed to follow its procedures regarding the review of incoming and outgoing correspondence. The firm, through Mitchell and an individual, failed to adequately supervise a registered representative s use of a fax machine, as the individual never reviewed any incoming or outgoing faxes from that machine and thought that Mitchell was reviewing them.

6 However, Mitchell was unaware that the registered representative had a fax machine. In addition, the firm s procedures did not require a review of the fax machine s log on a regular basis, nor did it require a duplicate copy of faxed material to be sent automatically for review. Therefore, any communications sent from the registered representative s fax machine were not reviewed. The findings also included that the firm s procedures did not require that the value of outside holdings manually entered into the consolidated reports be verified or reviewed by a supervisor before being provided to customers. As a result, no supervisor verified or reviewed valuations associated with manual entries made in any of the reports.

7 FINRA found that the firm failed to maintain certain consolidated reports sent to its customers. Consequently, the firm does not have any record of certain consolidated reports distributed to customers. FINRA also found that the firm failed to establish, maintain, and enforce WSPs regarding its client file review and branch audit programs. While the firm did not have written policies or procedures addressing whether registered representatives should be provided with advance notice of which files would be reviewed, the firm s Director of Compliance for Surveillance believed that the firm s unwritten policy was not to give registered representatives advance notice of the specific files to be reviewed. Rather, the supervisor should pick the files at the time of the review.

8 However, while Mitchell was conducting file reviews, many times he would have the registered representatives send him the files to be reviewed, or let them know ahead of time which files he would be reviewing. Despite being reprimanded by the firm s Director of Compliance for Surveillance, Mitchell continued to provide registered representatives with advance notice of which files would be reviewed, and the firm did not take any additional steps to monitor Mitchell s procedures in this area or enact additional policies or procedures. Mitchell also notified the registered representatives under his supervision in advance of the examination despite knowing that the examination of a branch office was supposed to be unannounced.

9 The suspension is in effect from August 17, 2015, through March 16, 2016. (FINRA Case #2012032782402) disciplinary and Other FINRA Actions 3 erOas2l8 7 Firms FinedAmerican Financial Associates, Inc. (CRD #29049, Easton, Pennsylvania) submitted an AWC in which the firm was censured and fined $12,500. Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that firm registered representatives emails stored on their personal computer hard drives were not retained in the manner required under Rule 17a-4(f) as promulgated under Section 17(a) of the Securities Exchange Act of 1934. The findings stated that the emails were not kept in an easily accessible place, were not stored exclusively in a non-rewritable, non-erasable format, and no independent third party had the necessary access to these records.

10 The firm did not give FINRA advance notice of its use of electronic storage media and it lacked the required audit system. The findings also stated that the firm failed to establish, maintain and enforce a supervisory system and WSPs reasonably designed to ensure the review of registered representatives securities-related correspondence with customers, and failed to conduct any supervisory review of registered representatives emails. (FINRA Case #2013035119901)Barclays Capital Inc. (CRD #19714, New York, New York) submitted an AWC in which the firm was censured, fined $40,000 and required to revise its WSPs. Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it transmitted reports to the Order Audit Trail System (OATSTM) that contained inaccurate, incomplete or improperly formatted data.