The Financial Industry Regulatory Authority has fined Cetera Advisor Networks LLC and two of its affiliates $1 million for failing to establish supervisory procedures to monitor private securities transactions conducted by certain customer representatives.
The firms, which included Cetera Advisor Networks LLC, Cetera Advisors LLC and Cetera Financial Specialists LLC, were also censured by Finra.
According to Finra’s letter of acceptance, waiver and consent, from January 2011 through December 2018, Cetera Networks and Cetera Advisors each failed to establish, maintain and enforce a supervisory system and written supervisory procedures reasonably designed to supervise certain private securities transactions conducted by their dually registered representatives at unaffiliated or "outside" registered investments advisors. Cetera Specialists engaged in the same practice from November 2012 through January 2018, Finra said.
The dually registered reps were managing more than $80 billion in customer assets across more than 47,000 accounts by early 2018, Finra said.
Finra’s letter noted that the firms were made aware of the deficiencies through Securities and Exchange Commission examinations in July 2013, August 2015 and September 2017. It said they acknowledged their obligations to supervise private securities transactions of their dually registered reps during the relevant periods. But they failed to follow through.
Finra rules obligated the Cetera firms to supervise the reps’ private securities transactions, the letter said, noting that the firms charged and collected fees from their dually registered reps for such supervision.
The divided $1 million fine required Cetera Advisor Networks to pay $750,000, Cetera Advisors to pay $150,000 and Cetera Financial Specialists to pay $100,000.