The Financial Industry Regulatory Authority Inc. on Friday fined a five-person broker-dealer on Long Island $35,000 for a variety of shortcomings dating back to June 2020, when Regulation Best Interest became the standard of conduct for brokers registered with Finra.
For 2½ years, Long Island Financial Group Inc. "failed to establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance" with Reg BI, Finra said. The new standard prohibits brokers from putting their interests, such as maximizing compensation, ahead of their customers’ interests, such as getting the best return on their investments.
According to Finra, the firm also "failed to establish and maintain a supervisory system, including written supervisory procedures, reasonably designed to achieve compliance with Reg BI." And it failed to deliver to its clients Form CRS, the customer relationship summary that was introduced along with Reg BI.
Long Island Financial Group consented to Finra's findings in the settlement without admission or denial. The firm's owner and president, Stuart Reis, did not return a phone call Monday morning to comment.
While the firm is small and the fine modest, Finra's action is yet another indication that the brokerage industry watchdog is dissatisfied with the industry's implementation of the rule.
Last year, in its annual exam and risk report, Finra found that broker-dealers were failing to act in the best interests of their customers and weren't adequately addressing conflicts of interest in the first full year of operating under Reg BI.
Meanwhile, in June, the Securities and Exchange Commission took its first substantive enforcement action involving Reg BI when it charged a broker-dealer and five of its registered representatives with inappropriate sales of an unrated, risky debt security to retail customers.
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