A broker-dealer executive and outspoken critic of the Financial Industry Regulatory Authority Inc. lost his appeal of a Finra suspension for failing to supervise his staff adequately.
A broker-dealer executive and outspoken critic of the Financial Industry Regulatory Authority Inc. lost his appeal of a Finra suspension for failing to supervise his staff adequately.
In January 2009, Finra suspended John B. Busacca III, barring him from working in the industry as a principal for six months and fining him $25,000 for failing to exercise “reasonable” supervision over personnel at his firm, North American Clearing Inc. of Longwood, Fla., in 2004 and 2005. Mr. Busacca was president and registered principal at the firm.
He was also fined $5,000 for allowing his firm to employ a chief compliance officer who was not registered with Finra. He was also ordered to pay $2,000 in costs.
Mr. Busacca appealed the Finra decision to the Securities and Exchange Commission in January. The decision against him was posted Friday.
According to the SEC's decision, Mr. Busacca's testimony revealed that during the period under question, he “admittedly focused his efforts on marketing the firm's services to new clients rather than on the firm's operation deficiencies. Evidence further indicated that [Mr.] Busacca's selling efforts, in fact, compounded operational problems by adding more client accounts to an already overwhelmed system.”
In 2007, Finra alleged that North American Clearing prepared and maintained inaccurate computations for customer reserves, failed to make prompt deposits to its special reserve account, and failed to notify or promptly notify Finra about the reserve issues. The regulator expelled the firm in 2009; in agreeing to the expulsion, North American Clearing neither admitted nor denied those allegations.
Mr. Busacca, now managing director of Broker-Dealer Exchange of Orlando, Fla., has a long history of criticizing Finra and its predecessor, NASD. After current SEC Chairman Mary Schapiro became chief of NASD in 2006, Mr. Busacca told InvestmentNews, “At some point, you've got to ask [NASD executives], ‘Are you deaf?'”
Brokers and executives typically refrain from criticizing Finra or its policies publicly.
Reached this morning, Mr. Busacca noted that two SEC commissioners, Ms. Schapiro and Elisse Walter, did not participate in making the decision. Both commissioners are former NASD/Finra officials. Ms. Walters was formerly executive vice president, regulatory policy and programs of Finra.
“That's interesting, to say the least,” Mr. Busacca said. “I've been a well-known fighter of Finra policies.”
He stressed that the facts behind the suspension involved no harm to customers, and didn't result in customers' losing money. The customer complaints in the matter stemmed from delays in transfers of assets in one customer account from one brokerage firm to another, the process known as ACATs in the securities industry.
Finra had no comment on the matter.
Mr. Busacca is not licensed with a Finra firm at this time, according to his record on BrokerCheck.
