FINRA’s Department of Enforcement investigated Bagwell and found he failed to adequately supervise a registered representative who sold 18 Firm and non-Firm customers approximately $8.4 million in unapproved investments that were part of an ongoing Ponzi scheme. It is undisputed that during the relevant time period, Bagwell was responsible for ensuring that the aforementioned representative did not engage in private securities transactions without first reporting the transactions to Pruco and receiving approval to participate. Nevertheless, FINRA alleges Bagwell failed to take any steps to supervise the registered representative’s transactions as required by Pruco’s policies and procedures.
In addition to failing to supervise the registered representative’s involvement with the outside investment Ponzi scheme, Bagwell personally participated in the outside business activities without reporting the investments to Pruco. According to FINRA, Bagwell provided $25,000 and $10,000, on April 20, 2012 and August 22, 2012, respectively, to the representative so that the representative could invest Bagwell’s funds in securities at an outside brokerage account managed and controlled by the representative. However, neither Bagwell nor the representative ever disclosed these transactions to Pruco as required by the firm’s policies and procedures.
Based upon the foregoing misconduct, FINRA alleged Bagwell violated several financial industry rules and regulations, including FINRA Rule 2010 and NASD Conduct Rules 3010(b) and 3040. 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…” According to FINRA, an individual to whom supervisory authority is delegated, such as Bagwell, violates NASD Conduct Rule 3010(b) by failing to carry out his or her properly delegated responsibilities.
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 as a result of investing in the Ponzi scheme inadequately supervised by Bagwell at Pruco, 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.