Securities Arbitration Lawyer Blog
FINRA has fined Network 1 Financial Securities Inc. (“Network 1”) $25,000 over best execution rule violations. The firm was also censured and consented to revise its written supervisory procedures to comply with best execution rules.
Network 1 is headquartered in Red Bank, New Jersey, and has been a FINRA member since August 1983. Network 1 is a full-service broker-dealer firm. Its clients include institutional investors, managed pension funds, high net worth individuals, and hedge funds. The firm has 104 registered individuals and 21 branch offices.
In 2017, Network 1 was included in a Reuters study that analyzed FINRA data and identified 48 firms whose brokers have been flagged for serious incidents. The Reuters’ analysis showed that Network 1 had 44.6% of its brokers with at least one of the most serious red flags on their public disclosure. You can read more about the Reuters analysis and our firm’s work to update the analysis here.
If you have lost money with Network 1, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account.
FINRA AWC
Network 1 and FINRA entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) on February 17, 2021, over findings that from at least 2014 through the present, the firm failed to provide customers complete annual notifications required under Rule 606(b)(2) of Regulation NMS under the Securities Exchange Act of 1934. Specifically:
- From at least 2014 through May 19, 2019, Network 1 failed to notify customers that they could request a) the identity of the venue to which the customer’s orders were routed for execution for the six months prior to the request, b) information on whether orders were directed or non-directed, and c) the time of the transaction, if any, that resulted from such orders.
- From May 20, 2019, through the present, Network 1 failed to notify customers that they could request a) information on whether orders were filled on a held or not held basis and b) if the order involved options contracts, the identity of the venue to which the customer’s orders were routed for execution in the six months prior to the request, whether orders were directed or non-directed, and the time of the transaction, if any, that resulted from such orders.
Further, FINRA found that the firm also failed to establish a supervisory system, including written supervisory procedures, that was reasonably designed to achieve compliance with Rule 606.
Rule 606 of Regulation NMS
Rule 606 of Regulation NMS aims to foster greater transparency in connection with a broker-dealer’s best execution responsibilities. It requires that broker-dealers make publicly available quarterly reports that contain information on their routing of non-directed orders in national market system (NMS) securities.
Rule 606 requires that firms report both: a) the percentage of total orders for the section that were non-directed orders, and b) the percentages of total non-directed orders for the section that were market orders, marketable limit orders, non-marketable limit orders, and “other” orders.
“Other” orders include orders that are not limit or market orders, such as Not Held orders, market open and market close orders, and all-or-none orders. Firms are also required to provide in their reports material information about the broker-dealers’ order routing arrangements, including any arrangements for payment for order flow and any profit-sharing relationship.
The Rule includes notification requirements with which firms must comply. Rule 606(b)(2) states that a broker-dealer must notify its customers in writing at least annually of the availability on request of certain information related to the customers’ orders.
FINRA’s 2021 report identified industry-wide issues related to firms’ failure to comply with SEC Rule 606 disclosures. You can read more about FINRA’s 2021 report here. You can also read more about Best Execution here.
How to Recover Losses or Obtain a Free Consultation
If you have lost money with Network 1 Financial Securities, contact New York securities arbitration lawyer Jorge Altamirano of Iorio Altamirano LLP at jorge@ia-law.com or toll-free at (855) 430-4010 for a free and confidential evaluation of your account.
Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. We pursue FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.