According to FINRA, SagePoint Financial, Inc. was censured and fined $700,000 for failing to establish and maintain a supervisory system reasonably designed to supervise associated persons with histories of industry and regulatory-related misconduct.
The firm was found in violation of multiple supervisory requirements. First, SagePoint did not clearly delineate responsibility for imposing disciplinary action. The firm divided responsibility between supervisory personnel and compliance personnel, with regional vice presidents assigned responsibility for determining discipline and heightened supervision, while compliance also maintained procedures allowing similar decisions without involving supervision. This fragmented approach resulted in confusion, with both departments sometimes deferring to the other without either responding appropriately to impose heightened supervision or increased discipline.
Second, the firm's disciplinary recordkeeping was haphazard and fragmented. The firm had no written procedures concerning what disciplinary information to record or where to store it. Field supervision and compliance departments tracked internal discipline in separate databases that neither could access. Many disciplinary matters were not recorded in any database. Consequently, personnel issued discipline without complete information about representatives' patterns of violations, failures to respond to prior discipline, or disregard of firm directives.
Third, the firm failed to establish a system reasonably designed to comply with reporting obligations under FINRA Rule 4530(b) regarding multiple instances of violative misconduct. The firm's procedures provided no guidance on evaluating whether representatives engaged in multiple instances requiring reporting, and the firm made no such reports since 2013. For numerous representatives with repeat disciplinary histories, the firm failed to impose heightened supervision, appropriate discipline, or consider reporting. The firm disciplined 11 associated persons at least 110 times collectively but failed to impose heightened supervision on any of them. Investors should be aware that repeat offenders may pose elevated risks, and firms must maintain robust systems to track and respond to patterns of misconduct.
