Next Financial Group fined $1M for failure to supervise branch managers

Next Financial Group Inc. of Houston was fined $1 million today by the Financial Industry Regulatory Authority Inc. for failures to supervise its network of some 130 branch managers, also known as OSJs in the independent-contractor-broker-dealer industry.
JUL 22, 2009
Next Financial Group Inc. of Houston was fined $1 million today by the Financial Industry Regulatory Authority Inc. for failures to supervise its network of some 130 branch managers, also known as OSJs in the independent-contractor-broker-dealer industry. Next Financial allowed its office of supervisory jurisdiction to self-police the handling of customer accounts without adequate review from January 2005 to November 2006, according to Finra. Next Financial created a program at the end of 2006 using regional managers to review the OSJs' transactions, but Finra said that system wound up being “unreasonable” because of the thousands of trades the three regional managers wound up reviewing. The OSJs typically supervise and oversee reps' offices in a particular region. “The lack of reasonable policies and written procedures resulted in the firm's failure to detect churning of customer accounts by an OSJ manager, Gregory Horton, and a broker, Timothy Shively, as well as excessive markups and markdowns on corporate-bond trades by another two brokers,” Finra said in its statement. “As a result, customers of the firm, including elderly and retired individuals, lost about $768,000, which has been reimbursed.” In separate actions, Finra barred Mr. Horton and Mr. Shively from the industry in January 2008 and October, respectively. In a statement, Next Financial said it has made a number of new measures in response to the Finra fine. The firm said it has a new chief compliance officer, Robert Schlangen, and has more than doubled the number of analysts and examiners in its compliance department. Finra also sanctioned Next Financial's former compliance officer, Karen Eyster, suspending her as a principal for two months and fining her $35,000. Finra is based in New York and Washington.

Latest News

Why fixed income still belongs in your clients' portfolios
Why fixed income still belongs in your clients' portfolios

In an era of AI euphoria and market FOMO, getting back to basics with fixed income may be the most contrarian and most important move advisors can make.

Voya expands advisor managed accounts to add private market assets
Voya expands advisor managed accounts to add private market assets

Voya Financial adds private equity, credit and real estate options to its AMA program, building on support for looser federal investment rules in retirement accounts.

With executives leaving, Osaic’s Reid now in the spotlight
With executives leaving, Osaic’s Reid now in the spotlight

Shannon Reid, president of Osaic and the network’s number two executive, has plenty of challenges, industry executives said.

Investors sue crypto fund and platform, alleging $1.5 million never returned
Investors sue crypto fund and platform, alleging $1.5 million never returned

Auditors flagged the commingling. The COO allegedly knew. Investors kept getting the pitch

Wells Fargo nabs $1.7B RBC advisor team, loses two teams to LPL
Wells Fargo nabs $1.7B RBC advisor team, loses two teams to LPL

The advisors on the move include two brothers leading a family practice in Connecticut, and a husband-and-wife tandem working with business owners in the West Coast.

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income

SPONSORED Why direct indexing stopped being optional

Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.