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Robert W Pearce
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Mr. Pearce has tried, arbitrated and mediated numerous disputes involving complex securities, commodities, administrative, contract, commercial, business tort and employment law issues for over 30 years. He has represented hundreds of clients in Federal and state courts (trial and appellate) as... More
My company:
The Law Offices of Robert Wayne Pearce, P.A.
My blog:
The Investor's Rights Law Blog
    Sep 13, 2013 9:48 AM

    T. Rowe Price Investment Securities, Inc., a Baltimore, Maryland based brokerage firm, submitted a letter of acceptance, waiver, and consent after the Financial Industry Regulatory Authority (FINRA) entered findings alleging that it failed to deliver prospectuses to mutual fund customers within three business days of their purchases. FINRA stated that the firm's clearing firm contracted with a third-party service provider for the delivery of mutual fund prospectuses for some of the clearing firm's introducing brokers, including the firm. On a daily basis, the clearing firm provided the service provider with electronic information regarding mutual fund transactions requiring delivery of a prospectus to the firm's customers. The clearing firm also provided daily and monthly reports to the firm. The firm did not establish or implement adequate systems or procedures for review of the daily reports. Although the firm's procedures required review of the monthly reports, they did not adequately describe what the reviewer was required to look for or what actions the reviewer was required to take in the event that prospectus delivery deficiencies were identified. FINRA further stated that the firm did not take sufficient actions to ensure that all of its customers were receiving prospectuses on time. In addition, FINRA stated that because of the firm's failure to timely deliver prospectuses to certain customers who purchased mutual funds, these customers were not provided with important disclosures about these products by settlement date in contravention of the Securities Act. The firm was censured and fined a total of $40,000 for all violations.

    A prospectus is a document that discloses important information about an investment. It typically provides investors with material information about mutual funds, stocks, bonds, and other investments. Such information generally includes a description of the company's business, financial statements, biographies of officers and directors, detailed information about their compensation, any litigation that is taking place, a list of material properties, and any other material information.

    T. Rowe Price Investment Securities was required to establish and maintain a supervisory system and written supervisory procedures (WSPs) reasonably designed to monitor and ensure the timely delivery of mutual fund prospectuses. FINRA found that the firm's WSPs did not require an adequate review of the service provider's performance of its prospectus deliveries. Instead, the firm's system for supervising the timely delivery of mutual fund prospectuses involved substantial reliance on the clearing firm and the service provider. FINRA concluded that the firm lacked an adequate supervisory system or procedure that was reasonably designed to ensure that mutual fund prospectuses were being delivered on a timely basis consistent with the Securities Act, and failed to implement and maintain such a supervisory system and WSPs.

    The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. Please see our Instablog profile (left column) for ways to contact us and get answers to any of your questions about this blog post and/or any related matter.

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