The failures to monitor for "pre-existing relationships," in order for sales to qualify as good private placements, were particularly egregious in the current instance. Nonetheless, the case is a good reminder of the need for firms to have procedures in this regard. (See also; e.g., , where the firm's written supervisory procedures failed to define what constitutes a pre-existing relationship and failed to specify how such relationships should be documented or verified).  

The letter from Senators Warren and Reed exemplifies a particular approach to regulation: (i) all regulation is beneficial; (ii) rescinding any existing regulation is bad; and (iii) adding any new regulation is good.  

This is the wrong approach. As it is with any human endeavor, all regulation is an experiment. Maybe it will accomplish its desired goal, maybe it won't. Maybe circumstances will change. 

In the case of Form PF, that outlook would be quite generous…

Query: is a brief suspension and a small fine under these circumstances sufficient for what is effectively a fraud?  

That said, the facts beg many questions, starting with, how good were these impersonations? Did the broker do both men and women? Did the broker do accents? (And, more broadly, are there still any ?)

One interesting aspect of the misreporting of net capital, in this case, is that the firm consistently understated its net capital by consistently overstating the haircuts required by its open contractual commitments.