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2014 Top 10 naughty list
January 5, 2015
by Brian Wolf

Industry regulators handed out some hefty fines to financial firms in 2014, due to a variety of misdeeds and oversights. Here is a rundown of the 10 biggest fines handed out this year, presented in order of the amount of the fine.

These are all fines given to firms, so individual broker or adviser penalties are excluded. Click through to see what caused firms to come under the most regulatory scorn in 2014. (Needless to say, I hope they all got a lump of coal in their stockings this year.)

• WFG Investments; Fine of $700,000; Reason for fine: Failing to commit the time, attention and resources to a range of critical obligations in its supervision of registered reps.

• Berthel Fisher & Co. Financial Services Inc.; fine of $775,000. Reason for fine: Failure to supervise the sale of alternative investments such as non-traded REITs and leveraged and inverse ETFs.

• LPL Financial; fine of $950,000. Reason for fine: Supervisory deficiencies related to sales of nontraded REITs, oil and gas partnerships, business development companies, hedge funds, managed futures and other illiquid investments.

• Stifel Nicolaus & Co. and its subsidiary, Century Securities Inc; fine of $1 million. Reason for fine: Selling leveraged and inverse ETFs to customers for whom the investments were unsuitable, as well as the firms not having proper training or written procedures in place to make sure their advisers had an "adequate and reasonable basis" for recommending the products.

• Morgan Stanley; fine of $1 million. Reason for fine: Paying approximately $100 million in commissions to approximately 780 unregistered, retired brokers without properly ensuring they were no longer soliciting or advising.

• Two independent broker-dealers owned by Ladenburg Thalmann Financial Services Inc.; fine of $1.275 million.Reason for fine: Failure to supervise hundreds of brokers who created and sent false and inaccurate consolidated account statements to clients.

• Wells Fargo; fine of $1.5 million. Reason for fine: Failing to properly vet some 220,000 new customer accounts by doing the necessary identity verification to comply with anti-money laundering requirements.

• Bank of America Merrill Lynch; fine of $8 million. Reason for fine: Failing to waive mutual fund sales charges for certain charities and retirement accounts

• Citigroup Inc.; fine of $15 million. Reason for fine: Not adequately protecting against "potential selective dissemination of non-public research to clients and sales and trading staff." 

• J.S. Oliver Capital Management; fine of $15 million. Reason for fine: Breach of fiduciary duty and violations of securities laws via an alleged cherry-picking scheme that defrauded several clients out of about $10.9 million.

A registered investment adviser, J.S. Oliver Capital Management, and two financial advisers were ordered to pay nearly $20 million for an alleged cherry-picking scheme

that defrauded several clients out of about $10.9 million, according to an SEC enforcement action.



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