Woodbury Financial fined for Reg S-P violations

The SEC has fined independent broker-dealer Woodbury Financial Services Inc. of Woodbury, Minn., $65,000 for a variety of violations of Regulation S-P, which prohibits disclosure of non-public personal information about clients to non-affiliated third parties, such as other broker-dealers.
Woodbury’s misuse of client’s personal information was directly related to the firm’s recruitment of representatives and advisers, the SEC said in its order, which was released yesterday.
“Woodbury allowed recruits to provide some of their customers’ non-public personal information before becoming associated with Woodbury so that Woodbury could, on the recruits’ behalf, pre-populate account transfer and new account forms with certain customer information,” the commission said.
Woodbury, which has about 1,750 affiliated reps and advisers, “allowed, and on certain occasions, assisted” reps in moving non-public customer information to Woodbury before the reps left their previous broker-dealer.
Over the past few years, independent broker-dealers have closely watched securities regulators for guidance on Regulation S-P and recruiting.
The most notable case involved Next Financial Group Inc. of Houston, which was ordered by an administrative law judge to pay a $125,000 penalty for violations of Regulation S-P last June.
The information sent to Woodbury by recruits included clients’ Social Security numbers, account numbers, account registrations and dates of birth, the SEC said.
Beginning in March 2007, the firm stopped asking recruits to provide clients’ Social Security numbers and dates of birth.
A Woodbury executive said the firm was pleased to resolve the matter.
“No client has complained to Woodbury about the sharing of information and we are committed to protecting the privacy of all our clients,” Mark Sides, Woodbury’s chief legal officer, wrote in an e-mail.