Here's a new one in the annals of CEP violations - 16 individuals (RRs and supervisors) were fined and suspended for violating a broker-dealer's Firm Element CEP program. Sixteen current and former representatives of State Farm VP Management Corp. of Bloomington, IL, received fines ranging from $5-10,000 and suspensions ranging from 30 days to 6 months. One representative also was barred as a principal. State Farm is engaged in the business of selling mutual funds and variable products
What Went Wrong. It turns out that 9 supervisors directed or allowed RRs to take State Farm's in-house Firm Element Proficiency Tests for the supervisors or other representatives. The representatives engaged in the misconduct without any authorization from (or the apparent advance knowledge of) State Farm. State Farm reported the misconduct to FINRA after uncovering the test-taking irregularities in one of its regions and conducting a preliminary investigation. State Farm then expanded its internal investigation nationwide and provide FINRA with its findings.
One sanctioned rep, a former registered principal - Rebecca Sappington - was fined $10,000 and barred as a principal and suspended for 6 months in all capacities. She directed a subordinate to take the test sessions for at least 4 other RRs working in her area. When she learned that her directive was not carried out, she instructed her subordinate to delegate the task to another person, who was an unregistered and newly hired employee.
State Farm's Firm Element CEP Training. The 2005 Firm Element designed by State Farm was an internal, computer-based system. Covered Reps were required to complete a 2-hour training session and then pass a proficiency test with a minimum score of 80%. In order to access the Firm Element module, the participant was required to sign on to the system using a User ID and Password. The subordinate reps who took the test for their supervisors signed on as the supervisors for whom they were taking the test, using the superiors' User IDs and Passwords.
For a complete list of sanctioned individuals, link onto ... [FINRA Release, 3/6]
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