Great Point Capital LLC
The findings stated that the firm failed to reasonably design its surveillance system for potentially nonbona fide orders. For instance, while the firm used certain surveillance alerts designed to detect potential layering and spoofing, it set the parameters of those alerts narrowly and excluded some potentially manipulative trading activity.
In addition, the firm failed to reasonably supervise the review of its trade surveillance alerts. The firm’s WSPs failed to describe what a compliance associate should evaluate when reviewing alerts from the automated surveillance system and when alerts should be escalated for additional investigation. In addition, the WSPs did not provide for a supervisory review of the decisions by compliance associates to close alerts without escalation.
The findings also stated that the firm failed to reasonably supervise a representative's email communications to his customers and failed to enforce its procedures for supervisory review of such communications. The representative sent over a thousand emails to retail customers about private placements that contained misleading, unwarranted, exaggerated, or promissory statements. Dozens of those emails also falsely claimed the representative was an investment banker, even though he lacked FINRA registration in that capacity. Many of the communications lacked factual bases for customers to evaluate the representative's claims about the private placements and failed to include explanations of the risks associated with the investments. Notwithstanding these red flags, the firm's supervisory personnel marked all of the emails as "compliant" without escalation or further review.
The firm took no action to address the representative's misconduct until an internal investigation prompted by a regulatory request identified the issues, after which the representative was permitted to resign.
