FINRA alleges between May 17, 2010 and September 16, 2012, Foothill did not have an adequate supervisory system and written supervisory procedures in place to monitor its securities business, which includes the sale of equities, mutual funds, corporate and municipal debt, US government securities, oil and gas interests, options, private placements, direct participation programs, and variable contracts. FINRA also alleges Foothill failed to follow the supervisory procedures it had in place and failed to establish and enforce policies and procedures reasonably designed to supervise the Finn's securities business.
FINRA cited the following supervisory deficiencies as evidence Foothill did not have an adequate supervisor system, among other things:
- Relied upon a proprietary data system (STRIPES) for the supervision of its registered representatives and their securities activities and transactions that was inadequate;
- Had an inadequate supervisory system and WSPs relating to the heightened supervision of its producing managers;
- Failed to timely update its registered representatives Form U4s in at least 13 instances during the Relevant Period;
- Failed to timely file five customer complaints, and four other customer related disclosures with FINRA; and
- Failed to adequately review securities transactions of its registered representatives, and failed to adequately evidence the reviews that the Firm did conduct
As a result of the aforementioned misconduct, FINRA alleges Foothill engaged in multiple violations of NASD Rule 3010 and 3012, as well as FINRA Rule 2010. Under NASD Rule 3010, a brokerage firm owes a duty to all of its clients to monitor and supervise its employees properly. The rule states: “[e]ach member shall establish and maintain a system to supervise the activities of each registered representative…that is reasonably designed to achieve compliance with applicable securities laws and regulations…” If a FINRA-member fails to supervise its employees or conduct proper due diligence on investment products, then the firm may be liable to the customer for damages or disciplined by FINRA, or both.
Lufrano Law, LLC is a national securities litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. If you suffered losses investing with Foothill, you may be eligible to bring a FINRA arbitration claim to recover your investment losses. Please complete our online form or contact one of our attorneys at (800) 627-2179 for a free consultation.