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Woodbury Financial fined from 2011 to 2014

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Woodbury Financial was fined $150,000 and paid approximately $1,900,000 to customers of the firm and a Missouri based stockbroker for violating securities rules and regulations, by the unauthorized withdrawal and misappropriation of funds through an entity called Pacific Mutual Alliance, LLC, (“PMA”). Woodbury Financial failed to detect the scheme. (June, 2014). The representative is Joshua D. Gould.

Woodbury Financial was fined $60,000 for failing to fully retain certain business records and communications. Woodbury Financial, like other stockbrokerage firms, has a duty to properly review and preserve communications with customers. Woodbury Financial has an important duty to review and supervise the sales materials that are used by various stockbrokers, to prevent misrepresentations and unsuitable recommendations. (December, 2013).

Woodbury Financial was fined $45,000 for a lack of supervision of excessive trading by stockbrokers. Woodbury Financial knew that its supervision duties include reviewing accounts for excessive trading, but there was an insufficient system for doing so. The reports generated did not include basic information on the trades, and had no direct information on the customers. Woodbury Financial did not determine the turnover ratios or the commission v. equity ratio, or other tools for measuring activity in an account that are common in the securities industry. Knowing the customer’s background and investment objectives is crucial to supervising the activity, and determining if the trading is appropriate or not. As a result, Woodbury Financial failed to notice red flags in the account, and failed to take appropriate follow-up action on the accounts. (January, 2012).

Woodbury Financial was fined $75,000 for permitting a stockbroker to take approximately $990,000 from customers through various wire requests. The supervision of the wire request activity was insufficient, failing to detect the multiple wires from different customers, all going to the same account. That should have been a large, waiving red flag that required at least some additional follow-up. (August, 2011).

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