FINRA fines unregistered broker-dealer $45,000
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The Financial Industry Regulatory Authority has fined Rock Hill, South Carolina-based BNA Wealth $45,000 for operating as an unregistered broker-dealer and for failing to establish and maintain a supervisory system and written procedures to oversee municipal securities transactions.
BNA violated MSRB rules G-27 on supervision, G-2 and G-3 on professional qualifications requirements, and A-12 on registration, FINRA found. The firm also violated FINRA rule 1017 and NASD Rule 1017 by “failing to file an application with FINRA prior to implementing a material change in its business operations,” FINRA said, in addition to violations of FINRA Rules 3110 and Rule 2010 due to the fact that the firm’s supervisory system was not reasonably designed to achieve compliance with FINRA rules on private placements.
“The firm was aware as early as January 2009 that it was required to register with the MSRB and employ a municipal securities principal before selling municipal securities or receiving commissions from the sale of such securities,” FINRA said. “Despite this, between January 2018 and April 2022, BNA Wealth sold 529 plans totaling approximately $260,000 to four customers.”
A type of tax-advantaged saving plan designed to save for higher education expenses, shares of 529 plans are considered municipal securities and their regulation falls under MSRB rules.
The firm received no up-front commissions, but did receive trailing commission relating to those four new 529 plans in addition to five previously sold plans while the firm was not registered with the MSRB and did not employ a municipal securities principal.
Between January 2018 and June 2020, the firm also sold six different private placements to 24 customers when its FINRA membership agreement did not permit such a sale. The firm didn’t seek a change in the agreement until November 2020, when the firm filed an application with FINRA seeking approval to engage in private placements. The request was granted in January 2021.
Violating FINRA Rule 3110 also constitutes a violation of FINRA Rule 2010 on standards of commercial honor and principles of trade.
BNA Wealth, without admitting or denying FINRA’s findings, has consented to a censure and a $45,000 fine, $10,000 of which will be devoted to its violations of MSRB Rules G-2, G-3, G-27 and A-12.
The firm will also provide in writing within 180 days that the firm has remediated the violations and will provide a narrative description of exhibits that demonstrate the implementation, or else no longer engage in any municipal securities business.
The firm did not respond to a request for comment.
