First Allied Securities, Inc. recently agreed to settle for $1.95 million with the SEC where the SEC had previously charged the firm’s broker, Harold Jaschke. Supervising registered representatives is a job that must be taken seriously by broker-dealers,” said Rosalind Tyson, Director of the SEC’s Los Angeles Office. “By failing to establish reasonable systems to prevent Jaschke’s misconduct, First Allied did not fulfill its obligation to reasonably supervise its registered representatives.”
The SEC charged that that between May 2006 and March 2008, Jaschke executed numerous unauthorized transactions, made unsuitable recommendations, and churned the accounts of the City of Kissimmee, Fla., and the Tohopekaliga Water Authority. The SEC also charged that First Allied failed reasonably to supervise Jaschke because it did not establish reasonable systems to direct follow-up action in response to red flags regarding churning and suitability.
The SEC’s order found that First Allied had no system in place to monitor compliance with its rule prohibiting its brokers from using personal e-mail accounts to conduct business. This enabled Jaschke to use his personal e-mail account to send and receive business-related e-mails that were neither reviewed nor retained by the firm. The SEC’s order found that First Allied failed to retain certain business-related e-mails (spoliation of evidence) sent to and from its employees, as required under law.
First Allied consented to the issuance of the order without admitting or denying the SEC’s findings.