The Financial Industry Regulatory Authority (FINRA) recently announced it censured and fined Trident Partners, Ltd. (“Trident”). FINRA alleged Trident maintained inadequate supervisory systems and written supervisory procedures to monitor recommendations of complex, structured products known as steepeners. As a result, FINRA censured Trident and ordered it to pay $50,000 for other supervisory failures.
Trident (FINRA CRD No. 41258) has been a FINRA member since 1996. Trident is located in Woodbury, New York and operates a general securities business. According to FINRA, Trident employs approximately 33 registered representatives operating from four branch offices.
FINRA’s Department of Enforcement recently investigated Trident and determined from January 2010 through January 2012 it did not establish, maintain and enforce a reasonable supervisory system to supervise steepener transactions. A steepener is a structured product note with a relatively longer-term maturity period that is callable by the issuer within a short period of time. Steepeners pay interest for an initial period and then based upon the yield curve spread. According to FINRA, Trident’s sale of steepeners was a sizable portion of its business during the relevant time period.
Specifically, FINRA alleged Trident did not have written supervisory procedures pertaining to steepeners. Trident did not have policies in place to evaluation and conduct due diligence on the steepener transactions. Trident also did not adequately train its staff in connection with the recommendation of these investments. Finally, Trident did not have a policy to supervise the suitability or concentration of steepener investments in client accounts.
FINRA alleged Trident engaged in multiple violations of federal securities laws and industry rules and regulations, including but not limited to NASD Rules 3010(a) and 3010(b). 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…”
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. Here, FINRA censured Trident and ordered it to pay $50,000 for other supervisory failures.
Lufrano Law, LLC is a national investment litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. Please contact us at (800) 627-2179 for more information if you have been the victim of investment negligence or fraud.