The regulator said Chicago-based Northern Trust failed to monitor customer accounts for potentially unsuitable levels of concentration in CMOs, between October 2006 and October 2009.
According to the FINRA, Northern Trust adopted an exception reporting system that failed to capture or analyze CMO transactions, including trades of 10,000 equity shares or more, and certain trades of 250 or more of fixed-income bonds.
FINRA said, between January 2007 and June 2008, 43.5% of Northern Trust’s business was excluded from review.
FINRA executive vice president and chief of enforcement Brad Bennett said that Northern Trust’s deficient systems and procedures allowed more than 40% of its transactions to proceed without review, which in turn left vulnerable investors exposed to the risk of losing all or a substantial portion of their principal through potential over-concentration in CMOs.
Northern Trust Securities is a division of Northern Trust, an investment management firm with $93bn in banking assets and $662.2bn in assets under management.
