FINRA’s Department of Enforcement investigated Busch’s alleged misconduct and determined he violated his duty to supervise one of his registered representative’s misconduct. According to FINRA, between January 2011 and January 2012, the registered representative recommended unsuitable investments to an investor, including GMX Resources Preferred Stock, and two closed-end funds (Eaton Vance Tax-Managed Global Diversified Equity Income Fund and Eaton Vance Tax Managed Buy-Write Fund), that exceeded the investor’s risk tolerance.
Moreover, the registered representative exercised approximately 1400 discretionary trades in three different customers’ accounts without written authorization. With respect to the aforementioned examples of misconduct, FINRA alleges Busch failed to adequately supervise the registered representative’s misconduct despite numerous red flags.
Based upon the foregoing alleged misconduct, FINRA contends Busch violated NASD Conduct Rule 3010, and also violated FINRA Rule 2010. For example, NASD Rule 3010(b) requires each member to establish and maintain a system of supervision that is reasonably designed to achieve compliance with applicable securities laws and regulations and with applicable NASD and FINRA Rules.
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