FINRA imposes $1M fine on three Cetera firms
Cetera Advisor Networks LLC, Cetera Advisors LLC, and Cetera Financial Specialists LLC have agreed to pay a total fine of $1 million as a part of a settlement with the United States Financial Industry Regulatory Authority (FINRA).
From January 2011 through December 2018, Cetera Advisor Networks and Cetera Advisors, and from November 2012 through January 2018, Cetera Financial Specialists each failed to establish, maintain and enforce a supervisory system and written supervisory procedures reasonably designed to supervise certain private securities transactions conducted by their dually-registered representatives (DRRs) at unaffiliated or “outside” registered investments advisors (RIAs).
By early 2018, these DRRs managed more than $80 billion in customer assets across more than 47,000 accounts.
The Cetera Firms were aware of the supervisory deficiencies, FINRA says. They were identified in Securities and Exchange Commission (SEC) examinations in July 2013, August 2015, and September 2017. However, despite several efforts to address such deficiencies, the firms failed to implement systems and procedures to reasonably supervise the transactions.
Networks, Advisors, and Specialists’ failure to supervise the DRRs’ participation in private securities transactions violated NASD Rule 3040(c) and FINRA Rules 3280(c) and 2010. In addition, the firms’ failures to establish, maintain and enforce reasonable supervisory systems and written supervisory procedures violated NASD Rules 3010(a) and (b) and FINRA Rules 3110(a) and (b) and 2010.
Networks, Advisors, and Specialists also failed to make and preserve related books and records in violation of NASD Rule 3110 and FINRA Rules 4511 and 2010.
The total fine of $1,000,000 is allocated as follows: a $750,000 fine for Cetera Advisor Networks LLC, a $150,000 fine for Cetera Advisors LLC, and a $100,000 fine for Cetera Financial Specialists LLC.
On top of the fine, the respondents have agreed to a censure. Also, the respondents will have to review and revise, as necessary, their systems, policies and procedures with respect to the supervision of their DRRs’ securities transactions.