The firm was also ordered to pay restitution of $121,000 and make offers of rescission to buy back the securities sold to certain customers impacted by the firm's failure to supervise employee trading. FINRA also censured and fined Santander $2 million for supervisory failures related to sales of PRMBs and Puerto Rican closed-end funds, and for failing to reasonably supervise employee trading in its Puerto Rico branch office.
FINRA found that between December 2012 and October 2013, Santander did not ensure that its proprietary product risk-classification tool accurately reflected market risks of investing in PRMBs, and failed to adequately supervise its customers' use of margin and concentrated positions in their accounts. According to FINRA, the firm's systems and procedures did not require a review or assessment of its product risk-classification tool, used by Santander's representatives when recommending products to customers, to determine whether it factored in the changed risks of investing in PRMBs. Most notably, Santander did not review or assess the tool's PRMB risk classifications following significant market events such as the December 13, 2012, Moody's downgrade of certain PRMBs to one level above junk. The day after the Moody's downgrade, Santander stopped purchasing PRMBs that its Puerto Rican customers wanted to sell and accelerated its efforts to reduce the firm's inventory of PRMBs.
During this same time period, Santander did not have systems or procedures in place to ensure that any comprehensive review of accounts with significant concentration in Puerto Rican bonds and closed-end funds was conducted to determine whether new purchases were suitable in light of existing positions. Additionally,
FINRA found that Santander failed to reasonably supervise employee trading in its Puerto Rico office with a view toward mitigating potential conflicts of interest where customer orders were filled through positions held in their own broker's personal brokerage account. Because Santander did not have adequate systems in place, approximately 400 of these types of transactions went undetected. In concluding this settlement,
Santander neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
---
Sallah Astarita & Cox, LLC continues its representation of investors regarding possible sales practice abuses in connection with the sale and marketing of various Puerto Rican bond funds. Sallah Astarita & Cox attorneys have represented parties in over 750 arbitrations, more than most law firms, and are all former regulators and brokerage firm attorneys. Call our office for a free consultation at 212-509-6544.
FINRA Sanctions Santander Securities LLC $6.4 Million for Supervisory Failures Related to Sales of Puerto Rican Bonds |
