Magazine article American Banker

NASD Penalty against Citicorp Sends Signal on Broker Training

Magazine article American Banker

NASD Penalty against Citicorp Sends Signal on Broker Training

Article excerpt

The National Association of Securities Dealers sent a strong signal to the brokerage industry this week when it fined Citicorp Securities Inc. for not complying with beefed-up education requirements for brokers.

"This will get everybody's attention," said Mahlon Frankhauser, a partner at Kirkpatrick & Lockhart, a Washington, D.C., law firm. "It's a new program, and the NASD wants to show the world how seriously they take it."

The Citicorp subsidiary drew what some lawyers described as heavy punishment for being the first brokerage cited by the NASD as not complying with continuing-education rules adopted last year.

The NASD fined Citicorp Securities $25,000 and ordered it to pay an additional $300,000 for allowing 19 investment bankers in its corporate banking division to continue working, though they had not completed continuing education requirements.

Citicorp's blunder brings to light a new "administrative hazard" for banks expanding into brokerage, said Barbara Worthen, general counsel at Fleet Financial Group in Boston.

"These things are always a wake-up call, and it gives compliance lawyers a little red flag with respect to their requirements," she said.

Under the NASD rules, brokerages were required to set up continuing education programs by last January. Brokers must complete a computer-based training program on regulatory matters administered by a private company on behalf of the NASD.

In addition, brokerages must set up training courses to update their brokers on regulations and how new products work.

The fine against Citicorp Securities exceeded guidelines published by the NASD. For violating the education requirements, the suggested penalty ranges from $1,000 to $10,000 against a firm, plus $500 to $5,000 to represent the compensation earned by offending brokers while their registrations are inactive. …

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