FINRA’s Department of Enforcement investigated and held a hearing regarding Vaughan’s alleged misconduct, which resulted in a default decision. Nonetheless, the hearing panel rendered a decision finding that Vaughan failed to establish, maintain, and enforce a supervisory system for registered representatives on heightened supervision with a history of customer complaints, arbitrations and disciplinary actions. Specifically, Vaughan failed to follow HFP Capital’s written supervisory procedures, which required Vaughan and the compliance department to conduct a review to determine whether a representative should be placed on heightened supervision if that representative had a history of three or more customer complaints within the past two years.
In addition, FINRA alleged Vaughan failed to establish and maintain a reasonably designed supervisory system at HFP Capital for reviewing customer transactions from May 2012 to February 2013. According to FINRA, Vaughan unreasonably delegated to an inexperienced and inadequately trained junior employee the responsibility for conducting reviews of, inter alia, HFP Capital’s daily blotters.
Based upon the foregoing misconduct, FINRA alleged Vaughan violated several financial industry rules and regulations, including FINRA Rule 2010 and NASD Conduct Rule 3010. Specifically, 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…”
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 investment damage investing through HFP Capital from 2011 to 2013, you may be eligible to participate in a FINRA arbitration proceeding to recoup your losses. Please complete our contact form or contact one of our attorneys at (800) 627-2179.