The Jeffrey Matthews Financial Group (JMFG) agrees to pay $35,000 to resolve allegations of non-compliance with Regulation Best Interest (Reg BI), the advice standard for broker-dealers effective since 2020.
Finra, the self-regulatory organization for the brokerage industry, alleges that JMFG failed to establish a sufficient compliance program for Reg BI for nearly three years. The firm also did not build an adequate program for the customer relationship summary document mandated by the same rule-making package.
Ginny Colarusso, JMFG’s chief compliance officer, declines to comment due to a settlement provision restricting public statements. She mentions that “a corrective action statement will be out very soon.”
JMFG accepts the settlement without admitting or denying wrongdoing.
Based in Florham Park, N.J., JMFG operates nine branch offices, according to Finra’s settlement letter. The firm, registered with Finra since 1996, has approximately 40 registered representatives and primarily trades in municipal securities.
Reg BI and the attendant Form CRS requirement took effect on June 30, 2020. The Securities and Exchange Commission (SEC), which promulgated the rule, initially delayed enforcement actions to allow firms a grace period to develop compliance programs.
In recent years, regulators have adopted a stricter stance. The SEC and Finra have initiated numerous cases involving Reg BI and Form CRS. Many Form CRS cases involve firms failing to file the required document. Officials from both organizations indicate ongoing Reg BI violations and a pipeline of enforcement cases.
While Finra does not cite specific harm to clients, it alleges JMFG failed to implement written policies and procedures to ensure Reg BI compliance, a fundamental regulatory requirement.
Regarding Form CRS, Finra states that JMFG had “a few general procedures” but lacked specific protocols for preparing, filing, or updating Form CRS.
Finra alleges JMFG violated Rule 3110, which outlines firm supervision responsibilities, and Rule 2010, covering professional conduct.
The disciplinary action stems from a Finra examination of the firm.
