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FINRA Fines Newbridge Securities $125,000 for AML Failures and Unsuitable Recommendations

Posted on October 3rd, 2024 at 8:40 AM
FINRA Fines Newbridge Securities $125,000 for AML Failures and Unsuitable Recommendations

From the desk of Jim Eccleston at ÍøÆØ³Ô¹Ï

Newbridge Securities Corporation has been fined $125,000 and censured by the Financial Industry Regulatory Authority (FINRA) for inadequate anti-money laundering (AML) protocols and for unsuitable recommendations of complex investment products. In addition to the fine, the firm has been ordered to pay over $43,000 in restitution to affected customers, according to the DI Wire.

FINRA found that from June 2019 to July 2020, Newbridge failed to meet AML requirements when handling accounts for customers referred by a China-based issuer. The firm allowed numerous accounts to open without proper verification of customer identities, violating AML protocols.

Additionally, FINRA determined that between January 2015 and November 2019, Newbridge made unsuitable recommendations for customers with low or moderate risk tolerance to purchase Variable Rate Structured Products (VRSPs). These complex products initially offer a high “teaser” interest rate before shifting to a floating rate, posing significant risks to customers, particularly those with conservative investment goals. In some cases, Newbridge concentrated customer accounts in VRSPs, with positions exceeding 25% of their liquid net worth, exposing them to potential principal loss and little to no interest over extended periods.

These violations of FINRA rules, including Rule 3310 (AML compliance) and Rule 2111 (suitability of recommendations), led to the imposed sanctions. Without admitting or denying the findings, Newbridge consented to the fine and censure.

The DI Wire previously reported that Newbridge has faced several other regulatory actions. In September 2019, the firm was fined $225,000 for failing to properly supervise sales of complex securities. Additionally, in March 2023, Newbridge was fined $50,000 and ordered to pay over $114,000 in restitution for inadequate supervision of alternative mutual funds.

 

ÍøÆØ³Ô¹Ï LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

Tags: eccleston, eccleston law, finra

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