Financial Firms Settle with FINRA: ES Financial Services Resolves Solicitation of Non-US Investors Allegations and Lincoln Financial Securities Consents to Entry of Findings Alleging Inadequate Supervision

ES Financial Services Resolves Solicitation of Non-US Investors Allegations
E.S. Financial Services, Inc. has turned in a Letter of Acceptance, Waiver, Consent to the Financial Industry Regulatory Authority over allegations that it acted as a placement agent and solicited specific non-US investors to get involved in a commercial paper program that a foreign-based affiliate was offering. The firm is accused of providing misrepresentations in certain materials, including that like other commercial products, the program was a cash component of the customer’s portfolio, and also, that the investment was a low-risk, conservative proposition.

ES Financial is also accused of not sufficiently describing the risks involved and for close to four years failing to conduct the proper due diligence for the commercial paper program sales. FINRA’s findings note that the financial firm did not adopt, implement, or enforce written due diligence procedures customized for these instruments. Fortunately, investments were paid back in a timely manner and no investor lost funds. However, this does not mean that ES Financial succeeded in conducting a proper investigation into various issues.

ES Financial Services has agreed to a censure and will pay a $200,000 fine. However, by consenting to the sanctions and the entry of findings, this does not mean it is denying or agreeing that the allegations are true.

Lincoln Financial Securities Consents to FINRA’s Entry of Findings Alleging Inadequate Supervision
Lincoln Financial Securities Corporation will pay $500,000 to settle FINRA allegations that even thought it executed a policy mandating that registered representatives manually fill out a variable redemption cover sheet for any variable annuity redemptions effected, it did not make sure that employees were completing the VRCS forms. Because most of them did not fill out the form, the financial firm is accused of not succeeding in enforcing its supervisory system set up to make sure the recommendations to surrender or liquidate VAs to fund the buying of fixed annuities or equity-indexed annuities were suitable.

Per the findings, the firm’s WSPs did not let registered representatives earn commissions for security transactions taking place in customer accounts where these persons did not have licenses in the state where the customer was residing when the transaction occurred and also in the state of solicitation. Lincoln Financial Securities allegedly failed to detect about 2,500 transactions in these accounts even though the representatives on them were unlicensed in the state where the customer lived. It also is accused of not enforcing procedures and policies to make sure that all representatives had the proper licensing in the states where they executed securities transactions for clients.

Another alleged shortcoming by Lincoln Financial was the improper supervision of and lack of an adequate system related to communications of non-securities related matters and securities-related emails via firm email accounts and external accounts. FINRA also contends that Lincoln Financial did not properly supervisor client account files and activities for producing managers, even though it was a requirement, and during one year, the latter did not complete a proper Rule 3012 report because it did not deal with deficiencies that it knew about.

By settling, Lincoln Financial is not denying or admitting to the allegations.

If you believe that you have sustained losses because a broker committed similar actions, contact our institutional investment fraud lawyers today.


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