According to FINRA, Robert Patrick Foley was fined $5,000, suspended from association with any FINRA member in any principal capacity for four months, and required to complete 40 hours of continuing education concerning supervisory responsibilities for failing to reasonably supervise registered representatives at his member firm.

Foley was found in violation of his supervisory obligations. As a principal, Foley failed to reasonably supervise two registered representatives who excessively traded customer accounts, charging those customers more than $300,000 in commissions and fees in less than six months. Additionally, Foley failed to supervise a third representative who falsified the firm's books and records. Foley did not reasonably review orders or conduct periodic reviews to identify potentially unsuitable recommendations or excessive trading. Although he signed off on weekly trade reviews, he did not focus on red flags of potentially unsuitable or excessive trading, such as frequent trading, large trades placed on margin, in-and-out trading, and high commission charges.

Foley also failed to investigate red flags that the two representatives were recommending securities transactions in accounts despite not being registered in the customers' home states. Securities registration requirements exist to ensure that representatives are properly licensed in the states where their customers reside. Foley knew that the third representative listed as the representative of record for the accounts in question was only 20 years old with virtually no experience. He also knew that the two representatives who introduced the customers to the firm had been unable to obtain registrations in the customers' home states and that the third representative became their representative of record shortly thereafter. These circumstances presented obvious red flags suggesting that the two experienced representatives were using the young, inexperienced representative as a nominee to circumvent state registration requirements.

Foley did not take reasonable steps to investigate these red flags, such as contacting the customers. Had he done so, he would have learned that the two experienced representatives—not the third representative—were making securities recommendations to the customers. This supervisory failure allowed excessive trading to continue, causing significant customer harm. Principals have a critical responsibility to supervise representatives and detect misconduct. This case demonstrates that merely signing off on reviews is insufficient; principals must actually analyze the information and investigate red flags. The suspension in principal capacity prevents Foley from supervising others until he completes additional education.