H.D. Vest Investment Securities violated key customer protection rules and failed to provide adequate supervision of representatives, according to the SEC news release today. H.D. Vest failed to have proper policies and procedures in place to monitor its representatives’ outside business activities, and as a result some representatives used their outside businesses to defraud brokerage customers.
“'H.D. Vest lacked sufficient supervisory controls to track the transfer of customer funds to outside entities controlled by its registered representatives,” said David R. Woodcock, Director of the SEC’s Fort Worth Regional Office. “Firms like H.D. Vest do face greater challenges in supervising their representatives in numerous small branch offices spread across the country, but that doesn’t excuse the firm from establishing adequate policies and procedures to address those challenges.'
The SEC’s order finds that H.D. Vest violated the supervision requirements of Section 15(b)(4)(E) of the Securities Exchange Act of 1934 as well as the customer protection rules found in Section 15(c)(3) of the Exchange Act and in Rule 15c3-3. H.D. Vest also violated the document preservation requirements in Section 17(a) of the Exchange Act and in Rule 17a-4(b)(4). H.D. Vest consented without admitting or denying the findings in the SEC’s order to cease and desist from committing these violations and pay a $225,000 penalty. The representatives involved in the misconduct have since been the subject of criminal, civil, or FINRA enforcement actions."