The Financial Industry Regulatory Authority (FINRA), a securities industry regulator that operates under the oversight of the Securities and Exchange Commission (SEC), recently announced that it imposed hefty sanctions in connection with a scheme to sell unregistered microcap securities, in violation of federal law.  Pursuant to this disciplinary action, FINRA fined Cantor Fitzgerald & Co. $6 million; it also directed Cantor Fitzgerald to disgorge almost $1.3 million in commissions, plus interest.

According to FINRA, the supervisory system Cantor Fitzgerald maintained was not reasonably designed to satisfy its obligation to make a determination as to whether the securities in question were either registered with the SEC or subject to an exemption from registration requirements.  Pursuant to the determinations made by FINRA, Cantor Fitzgerald failed to properly equip supervisory personnel with the tools to identify “red flags” (indications of irregularity) associated with the illegal distribution of securities.  In essence, FINRA concluded that the aforementioned supervisory deficiencies, operating in conjunction with due diligence failures, facilitated the sale of “billions of shares of thinly traded microcap securities” despite the fact that a significant portion of those instruments “were neither registered nor exempt from registration,” as further discussed in FINRA’s news release.

FINRA (together with the NASD, a predecessor entity) has long emphasized that a broker-dealer’s responsibility of “[e]stablishing, maintaining, and enforcing written supervisory procedures is a cornerstone of self-regulation within the securities industry.”  See NASD NTM 98-96.  Moreover, as the SEC has noted, the diligent exercise of supervisory responsibilities is of utmost importance.  Framed in concise terms, such measures “serve[ ] to protect investors from fraudulent trading practices.”  See Bebel and Boliver, Effective Supervision, Investor Confidence And Capital Formation, Practicing Law Institute, Corporate Law and Practice, Securities Arbitration 2006, Vol. 2, 95, at 101 (2006).  And, in a larger sense, the diligent exercise of supervisory responsibilities no doubt heightens investor confidence and prompts members of the investing public to believe that they will be treated fairly in the financial markets.  Those considerations, in turn, increase the flow of capital available to young thriving companies – the inevitable effect of which promotes economic expansion, and positively influences standard of living considerations in general.

If you believe that you have been treated unfairly by a stock broker or some other financial services industry professional, give Chris Bebel a call.  Mr. Bebel, a seasoned securities fraud attorney, may be able to provide you with important insights.  And, depending on the circumstances, Mr. Bebel may be able to recover some or all of the monies that have been lost – although no promises or guarantees can be made in that regard.  Mr. Bebel, who has pursued securities fraud cases throughout the country, works in conjunction with Bradley Ellison, a talented paralegal who previously served as a master sergeant, U.S. Air Force.