Finra fined two firms a total of $850,000 this week, sending a message that brokerages need to be more diligent about disclosing their brokers' bankruptcies, civil judgments and other violations to regulators.
The Financial Industry Regulatory Authority Inc.
slapped UBS Financial Services Inc., the broker-dealer unit of UBS Wealth Management Americas, with a $500,000 fine on Tuesday for failing to report liens or civil judgments for as many as 100 brokers between 2010 and 2013.
Finra also
fined The Vanguard Group Inc. $350,000 last Friday for similar reporting failures for around 80 brokers between 2011 and 2013.
Finra rules require firms to disclose customer complaints, regulator actions and criminal charges as well as legal actions taken against brokers, such as tax levies, judgments from creditors or child support orders, within 30 days after learning about them. Most of those actions are then reported publicly on
Finra's BrokerCheck record.
BrokerCheck disclosure issues have come into focus recently following
calls last March by plaintiffs' attorneys for enhanced disclosure of possible red flags and a
Wall Street Journal analysis last year that found more than 1,500 brokers with bankruptcy filings from 2004 to 2012 that had not been disclosed on their public records.
In the cases of UBS and Vanguard, Finra said, the reporting issues were a matter of supervisory lapses. The two firms' payroll departments, for example, failed to notify compliance or do further due diligence when a wage garnishment order from a creditor was received.
In September, Vanguard retained an independent consultant to enhance its policies and procedures on reporting disclosure events.
A Vanguard spokeswoman, Katie Henderson, said in an email that the firm regrets the lack of timely filings and has taken steps to remedy the process.
Vanguard has roughly $3 trillion in assets across its divisions and 6,000 Finra-registered representatives.
UBS' advisory group has about 7,000 brokers and advisers and more than $1 trillion in assets. A spokesman for UBS, Gregg Rosenberg, did not immediately respond to an email requesting comment.
