On January 2nd, a FINRA regulatory decision handed down a suspension and fines for broker-dealer CSSC Brokerage Service, Inc. (“CSSC”). The decision also barred Eric S. Smith (CRD#:2894648), CEO of the parent corporation, from associating with any FINRA member firms in any capacity. Smith and CSSC engaged in fraudulent activity in the sales of securities to prospective investors.
According to the hearing panel decision, Smith and CSSC “…knowingly made misrepresentations and omissions of material facts in connection with the sales of securities…” Not only is this unethical firm customers, it is a violation of FINRA rules.
Mr. Smith, the majority owner of the firm and CEO of the parent company, also engaged in direct management of CSSC’s business affairs without being properly registered as a principal agent of the company. FINRA found more than one problem with the actions of Smith in regards to his actions related to firm management. By paying CSSC’s expenses, hiring representatives and managers, and supervising certain representatives, Smith “exercised control and management” of CSSC thus acting in the role of principal broker-dealer. This is a role reserved only for registered agents.
In addition to barring Smith, FINRA suspended CSSC for one year and imposed penalty sanctions of $120,000. And both Smith and CSSC will pay around $12,000 for the cost of the proceedings
Investment firms and all their employees, including supervisors, have a responsibility to act ethically. Disciplinary actions such as these are a reminder that supervisors are not shielded from liability, even if they remain unregistered.
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