Royal Alliance Associates, Sagepoint Financial & FSC Securities Sanctioned for Supervisory Failures; SagePoint Cited for Failing to Monitor Known Problem Brokers

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FINRA fined and censured three Advisor Group, Inc. subsidiaries—Royal Alliance Associates, Sagepoint Financial, and FSC Securities Corporation—for failing to adequately supervise 529 share-class recommendations.

Sagepoint paid an additional $700,000 fine for its failure to supervise previously disciplined brokers, with FINRA describing the firm's deficient disciplinary recordkeeping as "haphazard and fragmented."

For example, a previously-disciplined SagePoint representative purportedly converted $400,000 in customer funds through forgery, all after the firm allegedly declined to place the rep with a known history of misconduct on heightened supervision.

According to FINRA's report, Advisor Group's three subsidiary firms—Royal Alliance, Sagepoint, and FSC Securities—failed to establish and maintain a supervisory system that would check for share-class suitability factors specific to 529 plan investments so that the firms could identify red flags posed by brokers and investment advisers who recommended unsuitable transactions—such as share-class sales inconsistent with investors' time horizon.

In addition, FINRA found that SagePoint Financial (Phoenix, AZ) on its own failed to adequately supervise staff with histories of industry and regulatory misconduct.

In finding that SagePoint failed to establish and maintain a supervisory system to supervise associates with histories of misconduct, investigators found that SagePoint failed to delineate who at the firm was responsible for imposing disciplinary action and described SagePoint's overall disciplinary record keeping as "haphazard and fragmented."

FINRA found that a previously disciplined registered representative at SagePoint forged nine customers' signatures on variable annuity applications and converted $400,000 in customer funds by forging variable annuity withdrawal funds, all with prior discipline on the books that was known to the firm.

Investigators found several additional instances of previously disciplined SagePoint brokers and representatives continuing to engage in misconduct without detection or adequate response as the firm neglected to place these representatives on heightened supervision despite their histories of wrongdoing.

One such representative exceeded limits on the sale of mutual fund C shares, sent unapproved reports to customers and unapproved advertising, and a second such associate with a history of misconduct sold securities away from the firm and then supplied false information to compliance staff. Another previously-disciplined representative violated the firm's policies regarding rollovers and breakpoints for Unit Investment Trusts, while yet another rep—a supervisor with a history of misconduct—failed to report required personal financial woes as well as failed to supervise subordinates.

If you have invested with Royal Alliance Associates, SagePoint Financial, or FSC Securities, or with any broker or financial adviser with a history of misconduct who has engaged in further malfeasance through unsuitable recommendations, excessive trading, or outright conversation that has proven harmful to your investments or interests, despite their employing firm's knowledge of their problematic past, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.

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