FINRA Sanctions Newbridge Securities Again for Lax Protocols, Supervisory Lapses

Newbridge Securities Corporation, a Florida-based investment firm, has been censured and fined $125,000 by the Financial Industry Regulatory Authority. The sanctions stem from the firm’s failure to implement adequate anti-money laundering (AML) protocols and supervise the sale of complex investment products, specifically variable rate structured products (VRSPs). In addition to the fine, the firm has also been ordered to pay restitution of over $43,000 to affected customers.

According to FINRA, between June 2019 and July 2020, a China-based issuer referred more than 20 new customers to the firm to participate in an anticipated small-cap IPO. Because Newbridge’s AML program was insufficient and did not achieve compliance with customer identification program and customer due diligence requirements, the firm permitted numerous customers to open new accounts, despite multiple indicators that the firm did not know the customers’ true identities and without conducting ongoing customer due diligence.

Additionally, between January 2015 and November 2019, FINRA stated that Newbridge representatives made recommendations that their customers with low or moderate risk tolerance purchase VRSPs. VRSPs are complex structured products that initially pay interest at a fixed, above-market “teaser” rate for a short time, typically one year, before switching to a floating interest rate that is based on a reference index or asset. Given the substantial risks of VRSPs, FINRA said that these recommendations were unsuitable for the more risk-averse customers. Furthermore, Newbridge representatives unsuitably recommended that seven other customers concentrate their accounts in VRSPs. Each customer held positions in VRSPs that were equal to at least 25% of his or her liquid net worth as a result of those recommendations. Because VRSPs can potentially earn little or zero interest for years and subject customers to a risk of loss of principal, such concentrated positions were unsuitable.

These infractions violated multiple FINRA rules, including Rule 3310, which requires the development and implementation of a “reasonably designed” anti-money laundering program, and Rule 2111, which requires a member firm and its representatives to have a “reasonable basis” to recommend a securities transaction or investment strategy, among other rules.

Without admitting or denying the findings, Newbridge consented to a censure, $125,000 fine, and restitution of $43,457.66 plus interest.

FINRA also reported that, in September 2019, Newbridge was censured and fined $225,000 for multiple violations, including failing to establish, maintain, and enforce a system reasonably designed to supervise sales of complex securities, such as structured notes and non-traditional exchange-traded funds.

Additionally, in March 2023, Newbridge was censured, fined $50,000, and required to pay restitution of more than $114,000 plus interest for failing to establish, maintain, and enforce a supervisory system reasonably designed to supervise sales of alternative mutual funds.

As previously reported by The DI Wire, Newbridge was censured and fined $50,000 in March 2023 for lax due diligence, including failing to “reasonably supervise representative’s recommendations of an alternative mutual fund.” In 2017, the Pennsylvania Department of Banking and Securities fined Newbridge $499,000 for failing to supervise one Pennsylvania broker that sold structured products to his clients in the state.

Newbridge provides investment banking and wealth management services to retail and institutional investors. The firm has 141 registered representatives across 38 branches, including its headquarters in Boca Raton, Florida.

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