Finra Slaps Cetera’s Summit for Snail-Mail Lapses
Summit Brokerage, the independent broker-dealer that is folding its operations more tightly into parent firm Cetera Financial Group, agreed to its second fine in as many months over supervisory lapses.
The Boca Raton, Florida-based firm agreed to pay $40,000 to settle allegations that it failed to review its brokers’ work-related correspondence by snail mail with clients, according to a Financial Industry Regulatory Authority letter of acceptance it signed on Friday.
Some of Summit’s approximately 450 brokers made nearly 3,200 quarterly submissions of scanned correspondence between September 2015 and March 2018, but no one at the home office reviewed the submissions because Summit failed to assign a compliance person to oversee non-electronic correspondence, according to the letter.
“Summit was unaware of this failure until March 2018 when Finra staff requested copies of correspondence as part of a routine examination,” the regulator wrote.
The lapse violated rules requiring broker-dealers to supervise and document all incoming and outgoing written and electronic supervision and its broad Rule 2010 requiring members to act with “high standards of commercial honor.”
The fine comes after Summit in July agreed to pay $880,000 in fines and disgorgement for failing to respond to its clearing firm’s alerts about excessive trading by one of its brokers over five years and for failing to monitor the accuracy of consolidated account summaries brokers sent to customers over almost three years.
As is typical in Finra enforcement settlements, Summit agreed to pay the fines without admitting or denying the findings.
“The issues have been addressed by the firm,” Summit spokesman Sean Mogle wrote in an email.
Summit, whose brokers oversee about $17.5 billion in client assets, is in the process of shutting down as a broker-dealer and integrating itself into the parent company as an Office of Supervisory Jurisdiction that Cetera refers to as a “region.”
Private equity firm Genstar Capital purchased Cetera last year for a reported $1.7 billion. The agglomeration of six independent broker-dealers was engineered by real estate investment trust financier Nicholas Schorsch to distribute the REITs but collapsed into bankruptcy amid accounting irregularities.