FINRA charges firm $17,500 for reg BI violations
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Florham Park, New Jersey-based broker-dealer The Jeffrey Matthews Financial Group has been censured and fined $17,500 by the Financial Industry Regulatory Authority for failing to comply with Regulation Best Interest, violating Municipal Securities Rulemaking Board Rule G-27 on supervision as well as FINRA Rules 3110 and 2010.
The firm consented to the penalty without admitting or denying the findings. The firm also violated MSRB Rule G-27 and FINRA Rules 3110 and 2010 a second time, FINRA found, by failing to establish and maintain written supervisory procedures in order to comply with Exchange Act Rule 15l-1(a)(1), obligations requiring dealers to prepare, file, deliver and update its customer relationship summary or Form CRS. The period in question ran from June 2020 to March 2023 for both violations.
“Despite the firm’s awareness of Reg BI’s June 30, 2020, implementation date, the firm’s WSP’s contained a section titled Reg BI but contained no policies or procedures regarding complying with Reg BI’s requirements,” FINRA said. “Further, JMFG’s training on Reg BI to its representatives was inadequate as it focused on suitability rather than the requirements of Reg BI.”
The SEC’s Regulation Best Interest was established in 2019 and states that firms making such a recommendation to a retail customer “must act in the best interest of the retail customer at the time the recommendation is made, without placing your financial or other interest ahead of the retail customer’s interests.” The rule includes four component obligations: disclosure, care, conflict of interest and compliance.
The Commission also adopted Form CRS in 2019 for broker-dealers offering services to retail investors, and those using it were on the hook for compliance by June 30, 2020.
“During this period, the JMFG’s WSPs acknowledged that the firm was required to deliver Form CRS to all retail customers and detailed a few general procedures regarding Form CRS, but it did not prescribe any specific procedures for preparing, filing, or updating Form CRS,” FINRA said.
The firm was fined a total of $35,000 and $17,500 of it relates to violations of MSRB Rule G-27. The firm did not respond to requests for comment.
