Northern Trust Securities Agrees to $600,000 FINRA Fine Over Charges It Failed to Properly Monitor High-Volume Securities Trades and CMO Sales

Northern Trust Securities has consented to pay a $600,000 Financial Industry Regulatory Authority fine over securities charges accusing it of failing to supervise collateralized mortgage obligation sales and lacking the systems set up to properly monitor certain high-volume securities trades. FINRA contends that the alleged actions by the broker-dealer exposed investors to the risk of losing if not all then a significant part of their principal through potential over concentration in CMOs. By agreeing to settle, however, Northern Trust is not admitting to or denying the charges.

According to FINRA, from 10/06 and 10/09, Northern Trust failed to to watch out for unsuitable levels of concentration” in CMOs in customer accounts and this occurred in significant part because Northern Trust employed an exception reporting system that did not analyze or capture significant parts of its business, such as:

• Certain trades of 10,000 equity shares or more
• Certain trades of 250 or more of fixed-income bonds
• All CMO transactions

The SRO contends that from 1/07 to 6/08, 43.5% of the Northern Trust’s business was not included in the review. The SRO claims that not having the proper systems to properly monitor the fixed income trades of over 250 bonds and equity trades of more than 10,000 shares led to a failure on the financial firm’s part to look at the trades for concentration, excessive mark-ups, excessive suitability, trading, or commissions, or for trading in restricted stocks.

Northern Trust reportedly wasn’t aware of this problem until an elderly investor filed an arbitration claim related to the concentration in her Countrywide Financial Corp. CMO account.

Related Web Resources:

Finra Fines Northern Trust Unit $600,000 For Not Supervising CMOs, The Wall Street Journal, June 2, 2011

FINRA Fines Northern Trust Securities, Inc. $600,000 for Inadequate Supervision of Sales of Collateralized Mortgage Obligations and Certain High-Volume Securities Trades, FINRA, June 2, 2011


More Blog Posts:

Charles Schwab & Co. Defendant in Class-Action Securities Fraud Lawsuit Filed on Behalf of Schwab Total Bond Market Fund Investors Over CMOs and Mortgage-Backed Securities, Stockbroker Fraud Blog, September 7, 2010

HSBC Securities to Pay $375K to Settle FINRA Allegations that It Recommended Unsuitable Collateralized Mortgage Obligations to Retail Clients, Stockbroker Fraud Blog, August 25, 2010

SEC & FINRA Examine CMO Sales and Marketing Practices, Stockbroker Fraud Blog, January 23, 2008

Our securities fraud lawyers represent institutional investors who have suffered financial losses because of broker-dealer misconduct.