FINRA

FINRA RULE 2010 AND NASD RULE 3010: AMONG HIS DUTIES AS THE FIRM'S CHIEF COMPLIANCE OFFICER (CCO), NORTH WAS RESPONSIBLE FOR CONDUCTING THE FIRM'S REVIEW OF ELECTRONIC CORRESPONDENCE, OR EMAIL. THE FIRM'S WRITTEN SUPERVISORY PROCEDURES (WSPS) REGARDING THE REVIEW OF ELECTRONIC CORRESPONDENCE REQUIRED THE DESIGNATED PRINCIPAL, WHO IN THIS CASE WAS NORTH, TO REVIEW AN APPROPRIATELY SIZED SAMPLE OF INCOMING AND OUTGOING E-MAIL / IM CORRESPONDENCE; OR REVIEW ANY EMAILS/IMS FLAGGED BY FILTERING SOFTWARE (IF UTILIZED) ON A DAILY BASIS. THE WSPS FURTHER REQUIRED THE DESIGNATED PRINCIPAL TO MAINTAIN ALL REVIEWED EMAILS/IM IN A SEPARATE FOLDER (ELECTRONIC OR HARD COPY); INITIAL AND DATE ELECTRONIC CORRESPONDENCE REVIEW LOG; INITIAL AND MAINTAIN RECORD OF ANY FINDINGS AND ACTIONS TAKEN (AS APPROPRIATE). THE FIRM, ACTING THROUGH NORTH, FAILED TO ENFORCE ITS WSPS REGARDING THE REVIEW OF THE FIRM'S ELECTRONIC CORRESPONDENCE AND THE RECORDING OF SUCH REVIEW. NORTH FAILED TO ENFORCE THE FIRM'S WSPS IN THAT HE DID NOT INITIAL AND DATE AN ELECTRONIC CORRESPONDENCE REVIEW LOG.

Decision

Civil and Administrative Penalty(ies)/Fine(s)

$5,000.00

Monetary Penalty other than Fines

$1,985.99

$1,582.18

HEARING PANEL DECISION RENDERED JULY 23, 2015 WHEREIN NORTH IS FINED $5,000. THE SANCTION WAS BASED ON FINDINGS THAT NORTH FAILED TO ENFORCE HIS MEMBER FIRM'S WRITTEN SUPERVISORY PROCEDURES (WSPS) REGARDING OVERSIGHT OF ELECTRONIC COMMUNICATIONS. THE FINDINGS STATED THAT NORTH ASSUMED THE RESPONSIBILITY FOR REVIEWING THE FIRM'S ELECTRONIC COMMUNICATIONS AFTER HE RECOGNIZED RED FLAGS INDICATING THAT ANOTHER PRINCIPAL WAS NOT CONDUCTING THE REQUIRED REVIEWS. IN AN EFFORT TO COMPLY WITH THE WSPS, NORTH CONDUCTED OCCASIONAL, RANDOM REVIEWS OF ELECTRONIC COMMUNICATIONS, BUT NOT ENOUGH TO COMPLY WITH THE REQUIREMENTS OF THE FIRM'S OWN WSPS. ON AUGUST 17, 2015, NORTH APPEALED THE DECISION TO THE NAC. THE SANCTION IS NOT IN EFFECT PENDING THE REVIEW. NAC decision rendered August 3, 2017 wherein North was fined $5,000, ordered to pay hearing costs in the amount of $1,985.99, and ordered to pay appeal costs of $1,582.18. The sanction was based on findings that North failed to enforce his member firm's WSPs regarding the review of electronic communications. The findings stated that North assumed the responsibility for reviewing the firm's electronic communications after he recognized red flags indicating that another principal was not conducting the required reviews. In an effort to comply with the WSPs, North conducted occasional, random reviews of electronic communications, but not enough to comply with the requirements of the firm's WSPs. SEC decision rendered November 27, 2019 wherein North is fined $5,000. The SEC affirmed the NAC's findings and sanction imposed. On December 27, 2019, North appealed the SEC decision to the U.S. Court of Appeals for the District of Columbia Circuit. The sanction is not in effect pending review. U.S. Court of Appeals decision rendered October 23, 2020 which denied North's petition for review. On December 15, 2020, the U.S. Court of Appeals for the District of Columbia Circuit issued a mandate. Accordingly, this Decision became final on January 21, 2021.

HEARING PANEL DECISION RENDERED JULY 23, 2015 WHEREIN NORTH IS FINED $5,000. THE SANCTION WAS BASED ON FINDINGS THAT NORTH FAILED TO ENFORCE HIS MEMBER FIRM'S WRITTEN SUPERVISORY PROCEDURES (WSPS) REGARDING OVERSIGHT OF ELECTRONIC COMMUNICATIONS. THE FINDINGS STATED THAT NORTH ASSUMED THE RESPONSIBILITY FOR REVIEWING THE FIRM'S ELECTRONIC COMMUNICATIONS AFTER HE RECOGNIZED RED FLAGS INDICATING THAT ANOTHER PRINCIPAL WAS NOT CONDUCTING THE REQUIRED REVIEWS. IN AN EFFORT TO COMPLY WITH THE WSPS, NORTH CONDUCTED OCCASIONAL, RANDOM REVIEWS OF ELECTRONIC COMMUNICATIONS, BUT NOT ENOUGH TO COMPLY WITH THE REQUIREMENTS OF THE FIRM'S OWN WSPS. IF NO FURTHER ACTION IS TAKEN THE DECISION WILL BECOME FINAL SEPTEMBER 9, 2015. RESPONDENT WILL FILE AN APPEAL. HEARING PANEL OVERLOOKED THE FACTS IN THE CASE.

FINRA

FINRA RULES 2010, 4530(A)(1)(H), NASD RULES 3010(A), 3010(B), 3010(D), 3070(A)(9); WILLFULLY VIOLATED MSRB RULES G-17, G-27(A), G-27(B), G-27(C) AND G-27(E): NORTH, WHO WAS THE CHIEF COMPLIANCE OFFICER (CCO) AT HIS MEMBER FIRM, WAS RESPONSIBLE FOR ENSURING THAT THE FIRM HAD APPROPRIATE POLICIES AND PROCEDURES IN PLACE WITH RESPECT TO ELECTRONIC CORRESPONDENCE, WAS RESPONSIBLE FOR REVIEWING THE FIRM'S ELECTRONIC CORRESPONDENCE, AND WAS THE PRINCIPAL RESPONSIBLE FOR THE FIRM'S REPORTING OBLIGATIONS TO FINRA. A REGISTERED REPRESENTATIVE OF THE FIRM IN CONNECTION WITH HER SECURITIES BUSINESS, AIDED AND ABETTED A PRIMARY SECURITIES LAW VIOLATION BY ENABLING AN INDIVIDUAL TO OPERATE AS AN UNREGISTERED PERSON AND CIRCUMVENT THE REGISTRATION REQUIREMENTS OF SECTIONS 15(A)(1), 15B(A), AND 15C(A) OF THE SECURITIES EXCHANGE ACT OF 1934, EVEN THOUGH SHE KNEW HE WAS STATUTORILY DISQUALIFIED, NOT REGISTERED WITH FINRA, AND NOT ASSOCIATED WITH ANY MEMBER FIRM. BOTH NORTH AND ANOTHER PRINCIPAL OF THE FIRM WERE RESPONSIBLE FOR ESTABLISHING, MAINTAINING AND ENFORCING SUPERVISORY CONTROLS AND PROCEDURES. NORTH KNEW, OR SHOULD HAVE KNOWN, ABOUT THE REPRESENTATIVE'S BUSINESS RELATIONSHIP WITH THE UNREGISTERED INDIVIDUAL AT A CERTAIN TIME. NORTH ALSO LATER BECAME AWARE OF THE SERVICE AGREEMENT BETWEEN THESE PERSONS BECAUSE OF INQUIRES MADE BY FINRA DURING AN EXAMINATION OF THE FIRM. FURTHER, IN CONNECTION WITH AN ADDITIONAL INQUIRY BY FINRA, NORTH AND THE FIRM'S CEO DISCUSSED THE REPRESENTATIVE AND THE NON-REGISTERED PERSON'S BUSINESS RELATIONSHIP IN ADDITIONAL DETAIL. AT NO POINT DID NORTH REPORT TO FINRA THAT THE REPRESENTATIVE WAS ASSOCIATED IN A BUSINESS OR FINANCIAL ACTIVITY AND THE SALE OF A FINANCIAL INSTRUMENT, THE PROVISION OF INVESTMENT ADVICE, AND/OR THE FINANCING OF ANY SUCH ACTIVITIES WITH A STATUTORILY DISQUALIFIED PERSON. NORTH FAILED TO ESTABLISH AND MAINTAIN A SUPERVISORY SYSTEM THAT WAS REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH APPLICABLE SECURITIES LAWS AND REGULATIONS AND WITH NASD, FINRA, AND MUNICIPAL SECURITIES RULEMAKING BOARD (MSRB) RULES. SPECIFICALLY, NORTH FAILED TO ESTABLISH PROCEDURES THAT WERE APPROPRIATE FOR THE REVIEW OF ELECTRONIC CORRESPONDENCE. THE FIRM'S WRITTEN SUPERVISORY PROCEDURES (WSPS) WERE INADEQUATE BECAUSE THEY DID NOT SPECIFICALLY ADDRESS THE METHOD FOR REVIEW OR THE FREQUENCY OF REVIEW. AS A RESULT, NORTH WILLFULLY VIOLATED MSRB RULES G-17, G-27(B) AND (E). NORTH FAILED TO IMPLEMENT APPROPRIATE REVIEW OF FIRM EMAILS AND BLOOMBERG EMAIL MESSAGES. AT VARIOUS TIMES, NORTH FLAGGED VARIOUS ELECTRONIC CORRESPONDENCE FOR FOLLOW-UP INQUIRY BUT FAILED TO CONDUCT SUCH ADDITIONAL INQUIRY AND INSUFFICIENTLY REVIEWED FIRM EMAILS. NORTH FAILED COMPLETELY TO CONDUCT ANY REVIEW OF THE REPRESENTATIVE'S BLOOMBERG EMAIL MESSAGES. AT NO POINT DID NORTH, AS CCO, DO ANYTHING TO INDEPENDENTLY VERIFY THE SCOPE OF THE REPRESENTATIVE'S RELATIONSHIP WITH THE NON-REGISTERED PERSON OR HIS BUSINESS, OR OTHERWISE FOLLOW-UP ON ANY RED-FLAGS THAT SHOULD HAVE PUT HIM ON NOTICE TO HEIGHTEN HIS EMAIL REVIEW OF THE REPRESENTATIVE. NORTH SPECIFICALLY FAILED TO IMPLEMENT HEIGHTENED REVIEW OF THE REPRESENTATIVE'S FIRM EMAIL OR CONDUCT ANY REVIEW OF HER BLOOMBERG EMAIL. AS A RESULT, NORTH WILLFULLY VIOLATED MSRB RULES G-27(A) AND (C), AND MSRB RULE G-17.

Decision

Civil and Administrative Penalty(ies)/Fine(s)

$40,000.00

Monetary Penalty other than Fines

$4,404.51

$1,536.89

Suspension

Any principal and supervisory capacity

30 business days

2/1/2021

3/15/2021

Any principal and supervisory capacity

Two months

3/16/2021

5/15/2021

Hearing Panel decision rendered December 1, 2015 wherein North is censured, fined a total of $40,000, suspended from association with any FINRA member in any principal capacity for 30 business days for failing to report a relationship with a statutorily disqualified person, suspended from association with any FINRA member in any principal capacity for two months for failing to adequately review electronic correspondence in willful violation of MSRB Rules G-17 and G-27(a) and (c), and ordered to pay costs of $4,404.51. The suspensions shall run consecutively.The sanctions were based on findings that while CCO at his firm, North failed to report to FINRA that an associated person at his firm was involved in a variety of business activities with a statutorily disqualified person. The findings stated that North should have known of these relationships and should have followed up by seeking all relevant details of the associated persons' relationship with the company owned by the statutorily disqualified person. The findings also stated that North failed to establish, maintain and enforce a reasonable supervisory system regarding review of electronic correspondence. North did not review any Bloomberg communications and his email reviews were infrequent and insufficient. North's email review was also inadequate with respect to the associated person, in particular. Once North had learned of the associated person's business relationship with the statutorily disqualified individual, he should have conducted due diligence to learn the scope of it. This due diligence should have included conducting a heightened review of the associated person's electronic communications, given that he was the CCO and responsible under the written supervisory procedures for regulatory reporting and email review. North's failure to subject the associated person's electronic communications to a heightened review was unreasonable. As a result, North willfully violated MSRB Rules G-17 and G-27(a), (b), (c) and (e). The charge that North violated FINRA Rule 4530(a)(1)(H) was dismissed. On December 24, 2015, North appealed to the National Adjudicatory Council (NAC). The sanctions are not in effect pending the appeal. NAC Decision rendered March 15, 2017 wherein the sanctions and findings were modified. North was fined $40,000, suspended in all principal and supervisory capacities for 30-business-days, followed by a two-month suspension in all principal and supervisory capacities. North must also pay hearing costs of $4,404.51 plus appeal costs of $1,536.89. The NAC affirmed the Hearing Panel's finding that North failed to report an associated person at his firm relationship with a statutorily disqualified person. The NAC affirmed the Hearing Panel's finding that North failed to establish and maintain a reasonable supervisory system for the review of electronic correspondence and concludes that North's violation of MSRB Rule G-27 was willful. However, the NAC found that North's misconduct did not willfully violate MSRB G-17, as found in the Hearing Panel Decision. As the result of his willful violations of MSRB rules, North is statutorily disqualified. The sanctions are not in effect. On April 3, 2017, North appealed the decision to the SEC. The sanctions are not in effect pending the review. SEC decision rendered October 29, 2018 wherein the findings made are held and the sanctions imposed by the NAC are sustained. On December 27, 2018, North appealed the decision to the U.S. Court of Appeals for the District of Columbia Circuit. The sanctions are not in effect pending the review. U.S. Court of Appeals decision rendered October 23, 2020 which denied North's petition for review. On December 15, 2020, the U.S. Court of Appeals for the District of Columbia Circuit issued a mandate. Accordingly, this Decision became final on January 21, 2021.

Decision to be appealed to SEC.