FINRA Disciplinary action against Stock Loan

Excerpt from April 2009 FINRA Disciplinary Actions

National Investor Services Corp. (CRD #39410, Bellevue, Nebraska) submitted a Letter
of Acceptance,Waiver and Consent in which the firmwas censured and fined $75,000. Without admitting or denying the findings, the firmconsented to the described sanctions and to the entry of findings that it failed to establish,maintain and enforce an adequate supervisory systemand written supervisory procedures to supervise its securities lending business and registered securities lending representatives to prevent and detect fraudulent activity. The findings stated that the firmdid not include a description of what managers were to look for in reviewing Loanet reports, the steps to be taken if questionable activity was discovered, and how to document andmaintain documentation of supervisors’ oversight activities. The findings also stated that the
firmfailed to take steps to detect and prevent a registered representative from participating in fraudulent stock loan transactions for his personal benefit. The findings also included that the firmfailed to establish andmaintain a separate systemof followup and review to ensure that delegated supervisory authority and responsibility were being properly exercised. FINRA found that the firmpermitted a stock loan supervisor to review his own transactions.
(FINRA Case #2007011877701)
http://www.finra.org/web/groups/industry/@ip/@enf/@da/documents/disciplinaryactions/p118481.pdf