A broker-dealer entered into settlements (see here and here) with the state of
One Consent Order concerned the firm's failure to register with the state all of its representatives who made securities sales within the state and the supervisors of those representatives. The number of representatives who were not registered was substantial (304), as was the number of supervisors of those representatives (164), some of whom were not themselves registered in the state. The amount of improper commissions received was less than
The second Consent Order (pertaining to Gill) noted that his day job was working in the firm's marketing department creating educational materials. He did not service customers himself. The Consent Order states that Gill was registered as broker-dealer agent because "he was so closely involved with" the firm's registered agent. The supervisor responsible for supervising Gill "testified that he never once had a one-on-one interaction or conversation with Gill" and that he was ultimately responsible for the supervision of approximately 500 other agents. The firm's most significant supervisory failures with respect to Gill were that it (i) was unaware that "Gill ran rampant on his personal social media," (ii) "failed to reasonably monitor internal communications between and among its registered persons," particularly as to conversations between Gill and another employee with regard to
In settlement of the action for failure to register, the firm was required to register its agents, revise its supervisory procedures, and pay a fine to the state of
Commentary
Given the very large number of representatives who did business in
The consent order as to Gill is a mix of routine compliance and a suggestion that firms may need to supplement the monitoring of their employees' online activities. As to the routine compliance failures, the firm did not seem to enforce its own trading compliance procedures as to Gill. On the other hand, it is not surprising that Gill's supervisor did not meet with him, given how many others the supervisor was responsible for and the fact that Gill's day job did not actually require him to be supervised. The more difficult questions are (i) should the firm have been more active in monitoring the online conduct of its employees, (ii) should the firm have been more aggressive in monitoring conversations between registered representatives and (iii) was the firm unduly slow in waiting 11 days to take action against Gill once his social media activities were discovered?
It is not obvious that the firm was legally deficient or materially off-market in regard to the three questions above. That said, in light of the notoriety of the matter, it is not surprising that the firm was subject to a reasonably significant enforcement action. Now, other firms must decide whether there are lessons to be learned.
Primary Sources
- Massachusetts Securities Division Consent Order:
MML Investors Services, LLC - Massachusetts Securities Division Consent Order:
MML Investors Services, LLC
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