American Independent Securities Group, Llc

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TO ESTABLISH, MAINTAIN, AND ENFORCE A SUPERVISORY SYSTEM, INCLUDING WSPS, REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH APPLICABLE RULES RELATING TO SALES OF COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS). THE FINDINGS STATED THAT THE FIRM DID NOT ESTABLISH ANY PROCEDURES RELATED TO CMO TRANSACTIONS OR THE SUITABILITY OF CMO RECOMMENDATIONS. THERE WAS NO REASONABLE PROCESS TO EVALUATE AND DETERMINE WHETHER INVERSE FLOATERS (IFS) WERE APPROPRIATE FOR A GIVEN CUSTOMER OR TO ASSESS THE SIZE OF THE CMO INVESTMENT. THERE WAS ALSO NO GUIDANCE ADDRESSING TO WHOM CMOS COULD BE OFFERED, THE EXTENT TO WHICH A CUSTOMER'S ACCOUNT COULD BE CONCENTRATED IN IFS OR OTHER CMOS, OR THE PERCENTAGE OF A CUSTOMER'S NET WORTH THAT COULD BE INVESTED IN CMOS. THE FINDINGS ALSO STATED THAT THE FIRM FAILED TO REASONABLY SUPERVISE A REGISTERED REPRESENTATIVE. THE FIRM'S CHIEF COMPLIANCE OFFICER (CCO) DELEGATED TO A FIRM PRINCIPAL THE RESPONSIBILITY OF SUPERVISING THE REPRESENTATIVE. ALTHOUGH THE FIRM DID NOT HAVE ANY WSPS ADDRESSING CMO TRANSACTIONS, THE PRINCIPAL IGNORED MULTIPLE RED FLAGS THAT SHOULD HAVE ALERTED HIM THAT THE REPRESENTATIVE'S IF RECOMMENDATIONS WERE POTENTIALLY UNSUITABLE. IN PARTICULAR, IFS WERE RISKY AND ILLIQUID PRODUCTS THAT WERE INCONSISTENT WITH THE CUSTOMERS' INVESTMENT OBJECTIVES AND RISK TOLERANCES, THE REPRESENTATIVE'S CUSTOMER ACCOUNTS WERE ENTIRELY CONCENTRATED IN IFS, TRANSACTIONS WERE FLAGGED IN THE FIRM'S TRADE REVIEW SYSTEM, A MAJORITY OF THE CUSTOMERS WERE SENIORS, MANY ACCOUNT HOLDERS HAD LIMITED INCOME AND NET WORTH, AND THE CUSTOMERS PURCHASED THE SAME CMOS AT THE SAME TIME. THE PRINCIPAL SHOULD HAVE FOLLOWED UP ON THESE RED FLAGS BUT FAILED TO TAKE REASONABLE ACTION. THE FINDINGS ALSO INCLUDED THAT THE FIRM FAILED TO TAKE REASONABLE ACTION TO ENSURE THE PRINCIPAL PROPERLY EXECUTED DELEGATED RESPONSIBILITIES AND FAILED TO RESPOND TO RED FLAGS. THE CCO DELEGATED TO THE PRINCIPAL THE RESPONSIBILITY FOR SUPERVISING THE REGISTERED REPRESENTATIVE AND THEREFORE WAS RESPONSIBLE FOR ENSURING THE PRINCIPAL PROPERLY EXECUTED THAT RESPONSIBILITY. THE CCO SHOULD HAVE BEEN CONCERNED ABOUT THE REPRESENTATIVE'S RECOMMENDATIONS AND THE PRINCIPAL'S SUPERVISION OF THEM AND SHOULD HAVE ACTED ON THOSE CONCERNS. THE CCO WAS AWARE OF THE RED FLAGS AND KNEW THAT THE PRINCIPAL SUPERVISED THE REPRESENTATIVE'S ACTIVITY EVEN THOUGH HE HAD NO SPECIALIZED TRAINING RELATING TO CMOS AND IFS AND NO PRIOR EXPERIENCE SUPERVISING SALES OF THE PRODUCT. THE CCO ALSO WAS AWARE THAT THE REPRESENTATIVE'S TRANSACTIONS SET OFF ALERTS IN THE FIRM'S TRADE REVIEW SYSTEM. NONETHELESS, THE CCO DID NOT FOLLOW UP ON THESE RED FLAGS AND TOOK NO ACTION TO ADDRESS THE SUITABILITY ISSUES OR ENSURE THAT THE SUPERVISORY RESPONSIBILITIES HE HAD DELEGATED WERE REASONABLY EXERCISED. FINRA FOUND THAT THE FIRM FAILED TO REASONABLY SUPERVISE DISCRETIONARY AND SENIOR ACCOUNTS. THE FIRM PROCEDURES ASSIGNED TO THE CCO RESPONSIBILITY FOR ENSURING THAT THE FIRM CONSIDERED AN INDIVIDUAL'S INVESTMENT OBJECTIVES, EXPERIENCE, AND ACCOUNT SIZE BEFORE OPENING A DISCRETIONARY ACCOUNT AND DOCUMENTED ITS RATIONALE, ORDER TICKETS NOTED WHETHER DISCRETION WAS EXERCISED, DISCRETIONARY ACCOUNTS WERE REVIEWED SEMI-ANNUALLY TO ENSURE RECOMMENDATIONS WERE SUITABLE AND ACCOUNTS WERE NOT UNDULY CONCENTRATED, AND PRINCIPALS OF THE FIRM SPOKE WITH EACH DISCRETIONARY ACCOUNT CLIENT ANNUALLY TO DETERMINE LEVELS OF SATISFACTION AND DOCUMENTED THE CONVERSATIONS. THE PROCEDURES ALSO ASSIGNED TO THE CCO RESPONSIBILITY FOR ENSURING THAT THE FIRM CONDUCTED AN ANNUAL REVIEW OF SENIOR ACCOUNTS. HOWEVER, THE FIRM DID NOT DOCUMENT ITS RATIONALE FOR OPENING DISCRETIONARY ACCOUNTS, ORDER TICKETS FAILED TO NOTE WHETHER DISCRETION WAS EXERCISED, FIRM PRINCIPALS DID NOT SPEAK WITH DISCRETIONARY ACCOUNT CLIENTS, AND NOBODY CONDUCTED THE REVIEWS OF DISCRETIONARY AND SENIOR ACCOUNTS. Status: Final Sanction Detail: THE FIRM WAS CENSURED AND ORDERED TO PAY PARTIAL RESTITUTION TO CUSTOMERS OF $275,000. FINRA IMPOSED PARTIAL RESTITUTION AND NO FINE AFTER CONSIDERING, AMONG OTHER THINGS, THE FIRM'S FINANCIAL RESOURCES.

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TO ESTABLISH, MAINTAIN, AND ENFORCE A SUPERVISORY SYSTEM, INCLUDING WSPS, REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH APPLICABLE RULES RELATING TO SALES OF COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS). THE FINDINGS STATED THAT THE FIRM DID NOT ESTABLISH ANY PROCEDURES RELATED TO CMO TRANSACTIONS OR THE SUITABILITY OF CMO RECOMMENDATIONS. THERE WAS NO REASONABLE PROCESS TO EVALUATE AND DETERMINE WHETHER INVERSE FLOATERS (IFS) WERE APPROPRIATE FOR A GIVEN CUSTOMER OR TO ASSESS THE SIZE OF THE CMO INVESTMENT. THERE WAS ALSO NO GUIDANCE ADDRESSING TO WHOM CMOS COULD BE OFFERED, THE EXTENT TO WHICH A CUSTOMER'S ACCOUNT COULD BE CONCENTRATED IN IFS OR OTHER CMOS, OR THE PERCENTAGE OF A CUSTOMER'S NET WORTH THAT COULD BE INVESTED IN CMOS. THE FINDINGS ALSO STATED THAT THE FIRM FAILED TO REASONABLY SUPERVISE A REGISTERED REPRESENTATIVE. THE FIRM'S CHIEF COMPLIANCE OFFICER (CCO) DELEGATED TO A FIRM PRINCIPAL THE RESPONSIBILITY OF SUPERVISING THE REPRESENTATIVE. ALTHOUGH THE FIRM DID NOT HAVE ANY WSPS ADDRESSING CMO TRANSACTIONS, THE PRINCIPAL IGNORED MULTIPLE RED FLAGS THAT SHOULD HAVE ALERTED HIM THAT THE REPRESENTATIVE'S IF RECOMMENDATIONS WERE POTENTIALLY UNSUITABLE. IN PARTICULAR, IFS WERE RISKY AND ILLIQUID PRODUCTS THAT WERE INCONSISTENT WITH THE CUSTOMERS' INVESTMENT OBJECTIVES AND RISK TOLERANCES, THE REPRESENTATIVE'S CUSTOMER ACCOUNTS WERE ENTIRELY CONCENTRATED IN IFS, TRANSACTIONS WERE FLAGGED IN THE FIRM'S TRADE REVIEW SYSTEM, A MAJORITY OF THE CUSTOMERS WERE SENIORS, MANY ACCOUNT HOLDERS HAD LIMITED INCOME AND NET WORTH, AND THE CUSTOMERS PURCHASED THE SAME CMOS AT THE SAME TIME. THE PRINCIPAL SHOULD HAVE FOLLOWED UP ON THESE RED FLAGS BUT FAILED TO TAKE REASONABLE ACTION. THE FINDINGS ALSO INCLUDED THAT THE FIRM FAILED TO TAKE REASONABLE ACTION TO ENSURE THE PRINCIPAL PROPERLY EXECUTED DELEGATED RESPONSIBILITIES AND FAILED TO RESPOND TO RED FLAGS. THE CCO DELEGATED TO THE PRINCIPAL THE RESPONSIBILITY FOR SUPERVISING THE REGISTERED REPRESENTATIVE AND THEREFORE WAS RESPONSIBLE FOR ENSURING THE PRINCIPAL PROPERLY EXECUTED THAT RESPONSIBILITY. THE CCO SHOULD HAVE BEEN CONCERNED ABOUT THE REPRESENTATIVE'S RECOMMENDATIONS AND THE PRINCIPAL'S SUPERVISION OF THEM AND SHOULD HAVE ACTED ON THOSE CONCERNS. THE CCO WAS AWARE OF THE RED FLAGS AND KNEW THAT THE PRINCIPAL SUPERVISED THE REPRESENTATIVE'S ACTIVITY EVEN THOUGH HE HAD NO SPECIALIZED TRAINING RELATING TO CMOS AND IFS AND NO PRIOR EXPERIENCE SUPERVISING SALES OF THE PRODUCT. THE CCO ALSO WAS AWARE THAT THE REPRESENTATIVE'S TRANSACTIONS SET OFF ALERTS IN THE FIRM'S TRADE REVIEW SYSTEM. NONETHELESS, THE CCO DID NOT FOLLOW UP ON THESE RED FLAGS AND TOOK NO ACTION TO ADDRESS THE SUITABILITY ISSUES OR ENSURE THAT THE SUPERVISORY RESPONSIBILITIES HE HAD DELEGATED WERE REASONABLY EXERCISED. FINRA FOUND THAT THE FIRM FAILED TO REASONABLY SUPERVISE DISCRETIONARY AND SENIOR ACCOUNTS. THE FIRM PROCEDURES ASSIGNED TO THE CCO RESPONSIBILITY FOR ENSURING THAT THE FIRM CONSIDERED AN INDIVIDUAL'S INVESTMENT OBJECTIVES, EXPERIENCE, AND ACCOUNT SIZE BEFORE OPENING A DISCRETIONARY ACCOUNT AND DOCUMENTED ITS RATIONALE, ORDER TICKETS NOTED WHETHER DISCRETION WAS EXERCISED, DISCRETIONARY ACCOUNTS WERE REVIEWED SEMI-ANNUALLY TO ENSURE RECOMMENDATIONS WERE SUITABLE AND ACCOUNTS WERE NOT UNDULY CONCENTRATED, AND PRINCIPALS OF THE FIRM SPOKE WITH EACH DISCRETIONARY ACCOUNT CLIENT ANNUALLY TO DETERMINE LEVELS OF SATISFACTION AND DOCUMENTED THE CONVERSATIONS. THE PROCEDURES ALSO ASSIGNED TO THE CCO RESPONSIBILITY FOR ENSURING THAT THE FIRM CONDUCTED AN ANNUAL REVIEW OF SENIOR ACCOUNTS. HOWEVER, THE FIRM DID NOT DOCUMENT ITS RATIONALE FOR OPENING DISCRETIONARY ACCOUNTS, ORDER TICKETS FAILED TO NOTE WHETHER DISCRETION WAS EXERCISED, FIRM PRINCIPALS DID NOT SPEAK WITH DISCRETIONARY ACCOUNT CLIENTS, AND NOBODY CONDUCTED THE REVIEWS OF DISCRETIONARY AND SENIOR ACCOUNTS. Status: Final Sanction Detail: THE FIRM WAS CENSURED AND ORDERED TO PAY PARTIAL RESTITUTION TO CUSTOMERS OF $275,000. FINRA IMPOSED PARTIAL RESTITUTION AND NO FINE AFTER CONSIDERING, AMONG OTHER THINGS, THE FIRM'S FINANCIAL RESOURCES. Summary: ALL REQUIREMENTS IMPOSED BY THE ABOVE ACTION HAVE BEEN COMPLETED.