On July 12, FINRA accepted a Letter of Acceptance, Waiver, and Consent from a broker-dealer alleging that it did not enforce its written supervisory procedures related to outside business activities of its registered representatives. FINRA alleged that from April 2021 to March 2023, the broker-dealer failed to enforce its supervisory procedures while on notice that three of its employees founded and operated an independent company with two distinct lines of business (e-commerce storefronts and lead generation websites) outside of the scope of their association with the broker-dealer. As a result, FINRA alleged the broker-dealer violated FINRA Rules 3110 and 3270, and issued a censure and assessed a $60,000 fine.

While the broker-dealer maintained supervisory procedures that required certain processes for the written notification and approval of outside business activities, FINRA alleged that the firm did not follow its procedures. FINRA Rule 3110 required each member firm to establish, maintain, and enforce written procedures, and FINRA alleged the broker-dealer failed to enforce them. The broker-dealer was alleged to have also violated FINRA Rule 3270 (which prohibited employees from engaging in an OBA unless they provide prior written notice to the member firm) because it did not require written disclosure of the OBA despite repeatedly receiving new information regarding the employees’ involvement. The three employees terminated their association with the broker-dealer by March 2023; however, during the relevant time period, hundreds of customers purchased $33 million in goods and services from the employees’ OBA.