FINRA Fines 5 Big Firms for ‘Know Your Customer’ Failures
January 1, 2020 by Jeff Berman and Janet Levaux
The Financial Industry Regulatory Authority sanctioned Citigroup Global Markets, J.P. Morgan Securities, LPL Financial, Morgan Stanley Smith Barney and Merrill Lynch for failing to reasonably supervise compliance with FINRA Rule 2090, its “Know Your Customer” rule, when dealing with custodial accounts, FINRA said Thursday.
FINRA Rule 2090 requires member firms and their associated representatives to use reasonable diligence to determine the “essential facts” about each customer and “the authority of each person acting on behalf of such customer.”
To settle the matter, the five firms paid a total of $1.4 million in fines and agreed to a censure and to review their policies, systems and procedures to ensure that they are reasonably designed to supervise custodial accounts and to achieve compliance with FINRA Rule 2090, FINRA said.
As part of the settlements, the firms did not admit or deny the charges, but consented to the entry of FINRA’s findings.