FINRA censured and fined a firm for failing to detect the conversion of more than $370,000 from five customer accounts by one of its registered representatives over a two-year period.

Specifically, FINRA found that a registered representative of the firm who worked as a sales assistant and office manager stole more than $370,000 from a group of five customers that were comprised of his family members and his domestic partner. The office manager converted the funds by first submitting forged request forms to transfer funds from the customers' brokerage accounts into one of the firm's bank accounts under the pretext of making investments. He then paid those funds to himself as "additional salary and commissions he had not earned and other money to which he was not entitled."

Supervisory failure occurred when several red flags went undetected. After the firm discovered the misconduct, it paid restitution, plus interest and related fees, to the customers for the amounts converted.

FINRA Executive Vice President and Chief of Enforcement Brad Bennett emphasized that:

[This firm] failed to exercise reasonable diligence in supervising the transmittal of customer funds to third-party accounts. Firms need to pay special attention when funds are wired from customer brokerage accounts to accounts controlled by registered representatives, and will be held responsible when their representatives use their insider status to prey upon customers.

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