According to FINRA, Murray Securities, Inc. (CRD #142783), a broker-dealer based in Tyler, Texas, was censured and fined $35,000 for willfully violating Regulation Best Interest (Reg BI) and related compliance failures. The action was resolved on April 8, 2024.
Regulation Best Interest, which took effect on June 30, 2020, requires broker-dealers to act in the best interest of retail customers when making securities recommendations. A critical component of Reg BI is the Compliance Obligation, which requires firms to establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance with the regulation. FINRA found that Murray Securities willfully failed to establish these required written policies and procedures, a fundamental failure that calls into question the firm's commitment to putting customers' interests first.
The use of the term "willfully" in FINRA's findings is significant. A willful violation means that the firm intentionally engaged in the conduct that constituted the violation, as opposed to an inadvertent or negligent failure. Willful violations of Reg BI can carry additional consequences, including potential statutory disqualification from the securities industry.
Murray Securities was also found in violation of Form CRS requirements. Form CRS, or the Customer Relationship Summary, is a disclosure document that broker-dealers and investment advisers must deliver to retail investors. It provides key information about the firm's services, fees, conflicts of interest, and disciplinary history in a standardized, easy-to-understand format. Failure to comply with Form CRS requirements deprives investors of critical information they need to make informed decisions about their financial relationships.
Additionally, the firm maintained deficient written supervisory procedures (WSPs). WSPs serve as the compliance roadmap for a firm, outlining how the firm monitors its operations and ensures adherence to regulatory requirements. When WSPs are deficient, it often signals broader compliance weaknesses.
For investors, this case underscores the importance of Regulation Best Interest as a protective standard. Investors should ask their brokers how the firm ensures compliance with Reg BI and whether they have received a Form CRS document. If a firm cannot clearly articulate how it meets its best interest obligations, that may be a warning sign. Investors can review a firm's compliance history through FINRA BrokerCheck. This action was resolved under FINRA Case #2021069350301.
