WFG Investments Inc. has been fined $700,000 by the Financial Industry Regulatory Authority Inc. for failing to commit the time, attention and resources to a range of critical obligations in its supervision of registered reps.
In a settlement released last week, Finra outlined WFG's failures in half a dozen areas of supervision, including failing to conduct appropriate due diligence and supervision with respect to a private placement offering sold by a registered representative away from the company as an approved securities transaction.
WFG, which is based in Dallas, is a midsize independent broker-dealer with 280 independent registered reps.
From March 2007 to January 2014, WFG failed “to supervise the private securities transactions of ones of its reps that were executed through the rep's RIA,” and to maintain an adequate supervisory system to ensure that customer transactions were suitable, according to the settlement.
WFG also failed to appropriately supervise a rep's sale of alternative investments. Between August 2012 and July 2013, it granted one of its reps a “blanket waiver” from compliance with its written supervisory procedures concerning sale of alternative investments, including real estate investment trusts and private equity.
Several of the rep's customers invested more than 25% of their liquid net worth in alternatives, while some even invested over 90%, according to the settlement.
The same rep, who was identified as “SBD” and is no longer with WFG, routinely made statements on a radio broadcast that were “exaggerated, misleading or unbalanced, both in his negative description of conventional investments and his praise for various alternative investments,” according to the settlement. WFG was also cited for failure to appropriately supervise those broadcasts.
It accepted the settlement without admitting or denying its findings.
WFG president David Williams did not return phone calls seeking comment Monday.
Mr. Williams told
InvestmentNews in September that WFG had made
"wholesale changes" over the past 18 months, including the hiring of a new chief compliance officer, and doubling its compliance staff to nine.
The $700,000 fine is the firm's second six-figure Finra fine in the past two years. In March 2013, WFG agreed to pay a $200,000 fine over alleged lapses that led it to miss a stock fraud scheme.
