Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, March 19, 2009

FINRA Hearing Panel Sanctions Mutual Services Corp. on VA Reviews

A FINRA hearing panel fined Mutual Service Corporation (MSC) of West Palm Beach, FL, more than $1.5 million for failing to conduct timely reviews of variable annuity transactions, falsifying various books and records of the firm to make it appear that the variable annuity transactions were reviewed in a timely manner, and providing false and misleading information to FINRA during its investigation. The hearing panel sanctioned six current and former MSC personnel for their roles in the wrongdoing.  Three current or former employees — Denise Roth, a manager in MSC's operations department; Gari Sanfilippo, a former senior compliance examiner; and Kevin Cohen, a former compliance examiner — were permanently barred from the securities industry for falsifying the books and records of the firm. MSC's former Chief Administrative Officer and Executive Vice President, Dennis S. Kaminski; its Director of Operations, Susan Coates; and its former Chief Compliance Officer and Vice President, Michael Poston each were sanctioned for their supervisory failures. Kaminski and Coates each were fined $50,000 and suspended for six months from associating with any securities firm in a principal capacity. Poston was fined $20,000 and suspended from serving in a principal capacity for seven months.  Cohen and Sanfilippo have appealed the ruling to FINRA's National Adjudicatory Council (NAC), while the NAC unilaterally has called Kaminski's case for review of the sanctions. Sanctions against all three have been stayed pending a ruling from the NAC.

 In determining MSC's sanction, the hearing panel cited several aggravating factors. It considered first the firm's disciplinary history of deficient supervision of variable annuity transactions, but found more disturbing the fact that MSC deceived FINRA staff regarding the status of its supervisory system and procedures. The hearing panel found that MSC's supervisory and record keeping violations were "egregious."

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