The Financial Industry Regulatory Authority has fined 16 current and former registered representatives of State Farm VP Management Corp. for misconduct relating to continuing education examinations required by FINRA.
Nine reps were sanctioned for allowing subordinates to take State Farm’s “Firm Element” proficiency examination in their place. Six received fines and penalties for taking the tests in place of supervisors, while the 16th rep was a supervisor who directed a subordinate to take the examination in place of other reps. The reps received fines of between $5,000 and $10,000 as well as suspensions ranging from 30 days to 6 months.
FINRA, along with other self-regulatory organizations has administered a two-part continuing education program since 1995. One part of the program is called the “Firm Element,” which requires firms to provide training to reps—as well as their supervisors—who have regular contact with customers. The training covers topics related to their business, such as new products and regulatory issues.
The test administered by State Farm is provided through an internal, computer-based system requiring the reps to take a two-hour course and then pass an online proficiency test with an 80 percent score or higher. State Farm notified FINRA of the test-taking misconduct after undertaking its own investigation. FINRA subsequently determined that the reps engaged in the fraudulent test taking without the authorization of State Farm.
"The Continuing Education requirement leads to better trained and informed securities industry professionals and promotes investor protection," said Susan L. Merrill, FINRA executive vice president and chief of enforcement, in a statement announcing the sanctions. "In this case, while the failures by the firm's brokers to complete the requirements are disappointing enough, it is especially troubling that supervisors directed subordinates to help them avoid this important requirement."
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