In March 2023, FINRA censured and fined Hornor Townsend & Kent $180,000 for falling short in supervising a registered representative who recommended Future Income Payments, which turned out to be a Ponzi scheme. Future Income Payments was a structured cash flow investment that promised investors a 7-8% rate of return on their investment.
FINRA found that between July 2013 and March 2016, Hornor Townsend & Kent failed to reasonably supervise the broker who sold securities associated with the unapproved, outside business activity. According to FINRA, the firm failed to review the registered representative’s request in July 2013 to engage in an outside business activity involving the sale of a security, and instead to deny the request seven months later; Hornor Townsend & Kent did not communicate the decision to the registered representative.
According to FINRA Rules, Hornor Townsend & Kent was required to establish and maintain s system “to supervise the activities of each associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA rules” as well as “to establish, maintain, and enforce written procedures (WSPs) to supervise the types of business in which it engages and the activities of its associated persons that are reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA Rules.” This includes supervisors responsibility to reasonably investigate red flags that suggest that misconduct may be occurring and to act upon the results of such investigation.
FINRA reported that between July 2013 and March 2016, when the registered representative voluntarily resigned from Hornor Townsend & Kent, he sold more than $7 million in Future Income Payments securities to 39 investors, including 16 firm customers.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Hornor Townsend & Kent may be liable for investment or other losses suffered by its customers.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If you have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.
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