It is critical for broker dealer supervisory personnel to stay mindful of fingerprint records for non-registered associated persons.
A few years back the Financial Industry Regulatory Authority ("FINRA") censured Goldman Sachs Group Inc. (the "Firm") and fined the Firm approximately $1.25 million for failing to register the fingerprints of over 1,000 non-registered individuals who were associated with the Firm. The enforcement action noted between 2015 and 2019, Goldman Sachs failed to fingerprint or lacked records to demonstrate fingerprints of at least 1,061 non-registered associated individuals.
Further, Goldman Sachs was reportedly unable to determine whether it timely fingerprinted an additional 4,089 non-registered associated persons because it failed to locate any documentation reflecting that the firm fingerprinted these individuals. FINRA noted that the Firm violated securities regulations and failed to maintain a reasonable supervisory system and written procedures to identify and properly screen individuals who became associated with the firm in a non-registered capacity.
Pursuant to FINRA Rule 8310, FINRA may impose sanctions, such as a censure, fine, suspension or bar, upon a person associated with a brokerage firm for violations not only of FINRA rules, but also for violations of certain federal securities laws and MSRB rules. It is critical for broker dealer supervisory personnel to keep their eye on daily operations of the firm and employees, including staying mindful that FINRA’s jurisdiction, and its rules and enforcement actions, are not limited to registered associated persons. It is our belief that FINRA and the Securities and Exchange Commission ("SEC") will continue to place increased focus on recordkeeping requirements, which include fingerprint records for non-registered associated persons as well as policies and procedures regarding same.
A quick refresher for Broker Dealer CCOs:
The SEC adopted a number of amendments to Rule 17(f)(2) concerning the fingerprinting of securities industry personnel. These revisions are intended to simplify the process of claiming exemptions by clarifying existing provisions of the rule and by incorporating in the rule other exemptions previously granted by the Commission on a case-by-case basis. Pursuant to Section 17(f)(2) of the Securities Exchange Act of 1934, (15 USC 78q(f)(2)), and Exchange Rule 17f-2 thereunder, as amended, the SEC requires firms to submit fingerprints for all partners, directors, officers and employees, unless they are exempt under those same provisions. Exchange Rule 17f-2 exempts employees from fingerprinting who do not:
RegComp Financial is a national compliance consulting firm with offices in Texas and Florida. To read more about RegComp Financial and its services related to broker dealer compliance, please visit https://www.regcompfinancial.com/broker-dealer.
It is critical for broker dealer supervisory personnel to stay mindful of fingerprint records for non-registered associated persons.
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