FINRA fined and suspended First Financial Equity Corporation Chief Compliance Officer Melissa Ann Strouse of the firm's Arizona and San Diego, CA branches for her role in failing to ensure regulatory compliance, supervisory deficiencies, failing to have adequate written supervisory procedures (WSPs), failing to enforce the WSPs that were in place, and failing to conduct churning/excessive trading reviews. FINRA also found that some of the WSPs that actually were in place were themselves inaccurate.
According to the settlement, First Financial Equity under Strouse's compliance leadership suffered "numerous supervisory deficiencies," including, but not limited to, failing to establish WSPs, failing to have adequate WSPs, and failing to enforce the WSPs that were in existence. Furthermore, investigators wrote that the firm had zero WSPs whatsoever for certain aspects of its business, with inadequate WSPs in other areas, such as that concerning suitability and reviewing a broker's reasonable basis for recommending a certain security.
In addition to the inadequate procedures relative to suitability, the report states that First Financial Equity had zero WSPs pertaining to the supervision, approval, and sale of exchange-traded funds (ETFs), and inadequate WSPs pertaining to heightened supervision.
The findings state that Strouse had primary supervisory responsibility for the firm's Scottsdale, AZ branch, where FINRA says a "significant number" of the supervisory failures occurred, including the firm's failure to have any WSPs to address its ETF business, including the recommendation and sales of leveraged and inverse ETFs.
Investigators also found that the WSPs regarding discretionary trading were not enforced, and supervisory reviews to identify potential concerns such as churning, excessive trading and suitability were not performed over a two-year period.
Additionally, FINRA found that the firm's WSPs were inaccurate, as they did not reflect the firm's actual processes and procedures in regards to review/supervision of customer accounts, and were not amended during the relevant period to reflect the firm's actual procedures.
The present disciplinary action against First Financial Equity CCO Strouse follows a July 2016 complaint that alleged Strouse failed to supervise a specific registered representative who was charging excessive commissions, even after agreeing to cap the commission rate.
The settlement order makes no further reference to 2016's excessive commissions allegation, and notes that Strouse consented to FINRA's findings without admitting nor denying them.
If you have invested with First Financial Equity Corporation's Scottsdale, Arizona or San Diego, California branches, or with any firm whose supervisory failures, lack of WSPs, or similar inadequate procedures have resulted in unsuitable recommendations or sales, churning/excessive trading or abuse of discretion in your accounts, or excessive commissions and fees that have proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for investigation and consultation.