Texas broker-dealer agrees to pay $2 million in fines, restitution

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[August 27, 2016]  NEW YORK (Reuters) - A Texas wealth management firm U.S. regulators said grew too fast to supervise agreed to pay more than $2 million in fines and restitution to settle charges its senior management failed to rein in partner offices where brokers were churning accounts.


The Financial Industry Regulatory Authority said Friday that Caldwell International Securities Corp's (CISC) principal Greg Caldwell would also be fined $50,000 and barred from acting as a principal in another securities business.

Greg Caldwell could not be reached for comment.

CISC started in firm president Lennie Freiman's home in Fisher, Texas, and grew to include nine branches and 20 registered advisers in New York, New Jersey, Illinois, Florida and Nevada.

FINRA alleged in its complaint that the firm's management failed to develop and enforce a supervisory system as it expanded, which allowed many advisors to recommend unsuitable trades that they did not understand to clients.

Caldwell and other senior managers knew about the inappropriate investment strategies but did nothing to stop them, even as clients called to complain, according to the settlement agreement.

Fifteen clients paid over $1 million in fees and commissions to CISC advisers as a result of the inappropriate investment strategies, FINRA said in the complaint.

Caldwell and its senior executives accepted the offer without admitting or denying the allegations made by FINRA.

(Reporting by Elizabeth Dilts; Editing by James Dalgleish)

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