December 13, 2017 – An AWC was issued in which Ross was assessed a deferred fine of $10,000, suspended from association with any FINRA member in any principal capacity for two years and ordered to pay $21,836, plus interest, in deferred disgorgement of commission overrides received. Without admitting or denying the findings, Ross consented to the sanctions and to the entry of findings that while serving as the direct supervisor for all registered representatives in a branch office of her member firm, she failed to reasonably supervise a former representative who made excessive, unsuitable and unauthorized transactions in customer accounts, another former representative who made unauthorized exchanges of mutual funds in customer accounts, and other representatives at the branch who improperly used pre-signed and altered customer forms. The findings stated that Ross’s review of the firm’s trade blotter and switch reports in connection with her review of the first representative’s mutual fund transactions was not reasonable in that she failed to detect or prevent the excessive and unsuitable mutual fund transactions. When Ross did manage to identify questionable mutual fund transactions by the representative, she sought explanations from him and accepted his explanations without any further follow-up. Ross’s reviews of the firm’s trade blotters in connection 36 Disciplinary and Other FINRA Actions February 2018 with the representative’s swing trading were not reasonable in that she failed to detect or prevent the high volume of “swing trade” activity in the 11 customers’ accounts for close to a year. Although Ross asked the firm for an exception report to assist her in reviewing short-term mutual fund and excessive trading activity, when the firm denied this request, she took no further steps to enhance her ability to identify short-term mutual fund holding periods or excessive equity trading with the tools available to her. Had Ross engaged in reasonable follow-up by contacting the customers and had she detected the representative’s excessive trading sooner, she would have learned that the representative’s excessive mutual fund activity and “swing trades” in at least nine of 11 customers’ accounts were unauthorized. The excessive, unsuitable and unauthorized mutual fund transactions cost the 11 customers over $150,000 in commissions and fees, and collective losses of over $700,000. The findings also stated that Ross’s review of the second representative’s unauthorized mutual fund activity was not reasonable. Ross failed to detect the representative’s unusual activity–involving the placement of over 300 mutual fund sell orders to sell out of all of the mutual fund holdings in the accounts of more than 25 customers–due to his fear of a market correction. Ross’s review of this activity was not reasonable. She failed to detect this activity through her review of the firm’s trade blotter although some of the trading was done directly with the mutual funds and did not appear on the firm’s trade blotter. Ross only learned about the activity when she received a complaint about unauthorized mutual fund sales from one of the affected customers. When Ross learned that there might be additional customers involved, she questioned the representative about the trading but simply accepted his explanations for the numerous transactions without further investigation. While the representative restored the accounts of the affected customers to the holdings at the time of the unauthorized trades, as instructed by Ross, she never contacted any of the customers herself to follow up or to confirm that the customers were satisfied with the resolution. The findings also stated that Ross identified several questionable customer forms that had been reused or altered in the branch office’s customer files. Thereafter, Ross failed to prevent multiple uses of pre-signed and altered customer forms utilized by at least five representatives in the branch office, in spite of red flags, such as the use of correction fluid on documents that she approved. The use of these altered forms continued until they were identified by the FINRA. FINRA found that as a result of the first representative’s excessive and unsuitable swing trading, the firm prohibited him from engaging in any further commission-based securities transactions through the firm. Ross never reported to FINRA the first representative’s prohibition from engaging in commission-based securities transactions through the firm. Until he was barred by FINRA in early 2016, the first representative remained associated with the firm and continued his insurance business, sold alternative investments, and transferred some customer assets to an investment advisory firm affiliated with the firm. Disciplinary and Other FINRA Actions 37 February 2018 For the complaints brought against the second representative for unauthorized trading, Ross filed inaccurate Form 4530(d) Reports, which inaccurately stated that the complaints concerned “poor recommendation/poor advice” when it, in fact, concerned “unauthorized trading.” The suspension is in effect from December 18, 2017, through December 17, 2019. Ms. Ross was previously affiliated with the following securities broker dealer: ACCELERATED CAPITAL GROUP (CRD# 41270) 2012 – 2017 (4 years). (FINRA Case #2012033566203).