Initiated By
FINRA
Allegations
FINRA RULES 2010, 3130, NASD RULES 2110, 2821(B)(2), 2821(E), 3010, 3011(A), 3011(B), 3011(C), 3012, 3110: A MEMBER FIRM, ACTING THROUGH BRUNO, ITS CHIEF COMPLIANCE OFFICER (CCO) AND ANTI-MONEY LAUNDERING COMPLIANCE OFFICER (AMLCO), FAILED TO MONITOR, DETECT AND INVESTIGATE SUSPICIOUS TRANSACTIONS AND DETERMINE WHETHER TO FILE A SUSPICIOUS ACTIVITY REPORT (SAR) IN RESPONSE TO MULTIPLE RED FLAGS RELEVANT TO CUSTOMERS' ACCOUNTS, INCLUDING CERTAIN RED FLAGS SPECIFICALLY CITED IN THE FIRM'S OWN AML PROCEDURES. THE RED FLAGS INCLUDED THE QUESTIONABLE BACKGROUNDS OF THE CUSTOMERS, THE SUSPICIOUS CIRCUMSTANCES UNDER WHICH THE ACCOUNTS WERE OPENED AND THE ACCOUNT ACTIVITY ITSELF, INCLUDING A PATTERN OF SELLING MILLIONS OF SHARES OF VOLATILE, LOW-PRICED SECURITIES, AND WIRING OVER $3.7 MILLION OF PROCEEDS TO FOREIGN BANKS. THE FIRM, ACTING THROUGH BRUNO, FAILED TO IMPLEMENT ITS CUSTOMER IDENTIFICATION PROGRAM (CIP). IN AT LEAST 18 INSTANCES, THE FIRM OPENED NEW ACCOUNTS FOR INDIVIDUALS AND ENTITIES SUCH AS PARTNERSHIPS, BUT FAILED TO OBTAIN THE NECESSARY DOCUMENTATION ESTABLISHING THE CUSTOMER'S IDENTITY OR STATUS AS A LEGAL ENTITY. THE FIRM, ACTING THROUGH BRUNO, FAILED TO VERIFY THE IDENTITY OF CERTAIN CUSTOMERS BY USING REQUIRED DOCUMENTATION. THE FIRM, ACTING THROUGH BRUNO, FAILED TO IMPLEMENT RISK-BASED PROCEDURES FOR CORRESPONDENT ACCOUNTS OF FOREIGN FINANCIAL INSTITUTIONS REASONABLY DESIGNED TO DETECT AND REPORT THROUGH ENHANCED DUE DILIGENCE KNOWN OR SUSPECTED MONEY LAUNDERING ACTIVITY INVOLVING THE CORRESPONDENT ACCOUNTS, AS REQUIRED BY THE BANK SECRECY ACT. THE FIRM, ACTING THROUGH BRUNO, FAILED TO IDENTIFY AND PERFORM ENHANCED RISK-BASED DUE DILIGENCE ON THE ACCOUNT OF A BROKER-DEALER, FUTURES COMMISSION MERCHANT AND/OR A REGISTERED INVESTMENT COMPANY BASED OUTSIDE OF THE UNITED STATES. THE FIRM, ACTING THROUGH BRUNO, FAILED TO CONDUCT AN ADEQUATE INDEPENDENT TEST OF ITS AML PROGRAM FOR 2008. ADDITIONALLY, FOR THE 2008 TEST, THE FIRM AND BRUNO LIMITED ITS REVIEW OF NEW ACCOUNTS ONLY TO THOSE ACCOUNTS OPENED IN AUGUST 2008. THE FIRM FAILED TO CONDUCT AN INDEPENDENT TEST OF ITS AML PROGRAM FOR 2009. THE FIRM, ACTING THROUGH THE BRUNO, FAILED TO ESTABLISH, MAINTAIN AND ENFORCE A SYSTEM OF WRITTEN SUPERVISORY CONTROL POLICIES AND PROCEDURES THAT WERE REASONABLY DESIGNED WITH RESPECT TO THE FOLLOWING: THE DESIGNATION OF SUPERVISORS FOR PRODUCING MANAGERS; THE LIMITED SIZE AND RESOURCES EXCEPTION FOR BRANCH MANAGER SUPERVISION, INCLUDING DOCUMENTING THE FACTORS USED IN DETERMINING THE APPLICABILITY OF THE EXCEPTION, AND PROVIDING FOR ELECTRONIC NOTIFICATION TO FINRA OF THE FIRM'S RELIANCE ON THIS EXCEPTION; REVIEWING AND MONITORING THE TRANSMITTALS OF FUNDS OR SECURITIES FROM CUSTOMERS TO THIRD-PARTY ACCOUNTS; REVIEWING AND MONITORING CUSTOMER CHANGES OF ADDRESS AND THE VALIDATION OF SUCH CHANGES; AND HEIGHTENED SUPERVISION OVER THE ACTIVITIES OF EACH PRODUCING MANAGER RESPONSIBLE FOR GENERATING 20% OR MORE OF THE BUSINESS UNITS SUPERVISED BY THE PRODUCING MANAGER, IN THAT THE FIRM, ACTING THROUGH BRUNO, FAILED TO: ACCURATELY AND COMPLETELY IDENTIFY ALL OF ITS PRODUCING MANAGERS; CALCULATE, ON A ROLLING TWELVE-MONTH BASIS, WHICH (IF ANY) PRODUCING MANAGERS HAD EXCEEDED THE 20% THRESHOLD; REVIEW THE NEW ACCOUNT FORMS FOR CUSTOMER ACCOUNTS SERVICED BY PRODUCING MANAGERS; AND ENFORCE THE FIRM'S OWN PROCEDURES REGARDING THE DAILY SUPERVISION OF PRODUCING MANAGERS' CUSTOMER ACCOUNT ACTIVITY. THE FIRM, ACTING THROUGH BRUNO, ITS DESIGNATED PRINCIPAL, FAILED TO SUBMIT TO THE FIRM'S SENIOR MANAGEMENT NO LESS THAN ANNUALLY, REPORTS THAT DETAILED THE FIRM'S SYSTEM OF SUPERVISORY CONTROLS, SUMMARIZED THE RESULTS OF THE FIRM'S TEST OF ITS SUPERVISORY PROCEDURES AND SIGNIFICANT IDENTIFIED EXCEPTIONS, AND DESCRIBED ANY ADDITIONAL OR AMENDED SUPERVISORY PROCEDURES CREATED IN RESPONSE TO THE TEST RESULTS. [CONTINUED IN COMMENT]
Resolution
Decision & Order of Offer of Settlement
Sanctions
Civil and Administrative Penalty(ies)/Fine(s)
Amount
$50,000.00
Sanctions
Requalification
Sanctions
Suspension
Registration Capacities Affected
ANY CAPACITY
Duration
THREE MONTHS
Start Date
9/17/2012
End Date
12/16/2012
Sanctions
COMPLETE 16 HOURS OF AML TRAINING
Regulator Statement
[CONTINUED FROM ALLEGATIONS]: THE FIRM, ACTING THROUGH BRUNO, ITS DESIGNATED PRINCIPAL, ISSUED AN ANNUAL CERTIFICATION REPORT FOR 2008 THAT: PROVIDED AN INCOMPLETE LISTING OF THE FIRM'S OSJ OFFICES AND PRODUCING MANAGERS; FALSELY STATED THAT THE FIRM HAD BEEN RELYING ON THE LIMITED SIZE AND RESOURCE EXCEPTION; AND FALSELY STATED THAT ALL REQUIRED REGISTERED PERSONS ATTENDED THE FIRM'S 2008 ANNUAL COMPLIANCE MEETING. THE FIRM ISSUED AN ANNUAL CERTIFICATION REPORT FOR 2009 THAT: PROVIDED AN INCOMPLETE LISTING OF THE FIRM'S PRODUCING MANAGERS AND FALSELY STATED THAT INDIVIDUALS WERE SENIOR TO OR OTHERWISE INDEPENDENT OF AN OWNER OF THE FIRM. THE FIRM, ACTING THROUGH BRUNO, FAILED TO ESTABLISH AND MAINTAIN A SUPERVISORY SYSTEM AND ESTABLISH, MAINTAIN AND ENFORCE WRITTEN SUPERVISORY PROCEDURES REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH THE REQUIREMENTS OF FINRA RULES AND THE FEDERAL SECURITIES LAWS. IN CONNECTION WITH THE SALES OF 23 DEFERRED VARIABLE ANNUITIES, THE FIRM, ACTING THROUGH BRUNO, FAILED TO MAKE REASONABLE EFFORTS TO OBTAIN ONE OR MORE OF THE FOLLOWING ITEMS OF CUSTOMER INFORMATION NECESSARY TO MAKE A SUITABILITY DETERMINATION: ANNUAL INCOME, FINANCIAL SITUATION AND NEEDS, INVESTMENT EXPERIENCE, INVESTMENT OBJECTIVES, INTENDED USE OF THE DEFERRED VARIABLE ANNUITY, EXISTING ASSETS, LIQUIDITY NEEDS, LIQUID NET WORTH, RISK TOLERANCE AND TAX STATUS. THE FIRM, ACTING THROUGH BRUNO, FAILED TO DEVELOP AND DOCUMENT SPECIFIC TRAINING POLICIES OR PROGRAMS REASONABLY DESIGNED TO ENSURE THAT ASSOCIATED PERSONS WHO EFFECTED AND REGISTERED PRINCIPALS WHO REVIEWED TRANSACTIONS IN DEFERRED VARIABLE ANNUITIES COMPLIED WITH THE REQUIREMENTS OF NASD RULE 2821 AND THAT THEY UNDERSTAND THE MATERIAL FEATURES OF DEFERRED VARIABLE ANNUITIES. THE FIRM, ACTING THROUGH BRUNO, FAILED TO MAKE AND KEEP CURRENT ORDER MEMORANDA FOR SECURITIES TRANSACTIONS EFFECTED THROUGH A CLEARING FIRM THAT CONTAINED THE INFORMATION REQUIRED BY SECURITIES EXCHANGE ACT OF 1934 RULE 17A-3.
WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, BRUNO CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS, THEREFORE HE IS FINED $50,000, REQUIRED TO REQUALIFY BY EXAMINATION AS A GENERAL SECURITIES PRINCIPAL PRIOR TO ASSOCIATION WITH ANY FINRA MEMBER IN THAT CAPACITY, COMPLETE 16 HOURS OF AML TRAINING AND SUSPENDED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY CAPACITY FOR THREE MONTHS. THE FINE SHALL BE DUE AND PAYABLE EITHER IMMEDIATELY UPON REASSOCIATION WITH A MEMBER FIRM FOLLOWING THE SUSPENSION, OR PRIOR TO ANY APPLICATION OR REQUEST FOR RELIEF FROM ANY STATUTORY DISQUALIFICATION RESULTING FROM THIS OR ANY OTHER EVENT OR PROCEEDINGS, WHICHEVER IS EARLIER. BRUNO MUST COMPLETE THE TRAINING WITHIN THREE MONTHS AFTER REASSOCIATION WITH A MEMBER FIRM AND WITHIN 30 DAYS FOLLOWING COMPLETION OF EACH TRAINING SESSION, HE MUST PROVIDE FINRA WITH WRITTEN PROOF OF COMPLETION. THE SUSPENSION IS IN EFFECT SEPTEMBER 17, 2012 THROUGH DECEMBER 16, 2012. FINE PAID IN FULL ON 2/6/13.
Broker Comment
MR. BRUNO VEHEMENTLY DENIES ALL ALLEGATIONS AGAINST HIM. HE HAS NOT BEEN ASSOCIATED WITH GSS FOR OVER 2 YEARS AND BELIEVES THAT HE HAS NOT BEEN PROVIDED THE PROPER DOCUMENTS/OPPORTUNITIES IN AN EFFORT TO PROPERLY RESPOND AND/OR RECTIFY ALLEGATIONS AGAINST HIM. MR. BRUNO ENTERED INTO A DECISION AND ORDER OF OFFER OF SETTLEMENT TO AVOID OVERWHELMING ATTORNEY COST.