The Financial Industry Regulatory Authority (FINRA) said Thursday that it has ordered Los Angeles-based Westpark Capital, Inc. to pay $400,000 for supervisory system failures, and has suspended two officers for failing to supervise brokers who churned customer accounts and committed other violations.
The sanction includes a $100,000 fine and $300,000 in restitution to affected customers.
FINRA suspended Westpark's former Chief Compliance Officer, William A. Morgan, for four months in any principal capacity and ordered him to pay a $5,000 fine.
Chief Operations Officer Jason S. Stern has been suspended for three months in any principal capacity and fined $20,000.
In related actions, FINRA barred and/or fined two brokers and a branch manager who were previously employed in Westpark's Long Island branch offices, and has filed a complaint against another former broker involved in the misconduct, charging him with churning accounts and other violations.
Two additional former brokers involved have already been barred, by FINRA or the Securities and Exchange Commission, for misconduct at other firms prior to or after their employment with Westpark.
In its release, FINRA said that several of the brokers involved came to Westpark from broker-dealers that had lengthy disciplinary records and that FINRA has expelled from the securities industry, including Stratton Oakmont, Inc., LH Ross & Co., Salomon Grey Financial Corp. and Continental Broker-Dealer Corp.
When Westpark hired them, FINRA said, several of the brokers themselves had histories that included multiple customer complaints and/or disciplinary actions.
"When a firm and its senior managers have reason to be aware of potential problems and fail to address the issues appropriately, they have not fulfilled their supervisory obligations," said James S. Shorris, FINRA EVP and Director of Enforcement. "Westpark's failure to recognize and respond adequately to both broker and customer account-related issues, involving brokers who came from troubled brokerage firms, resulted in significant customer harm."