The allegations read: Without admitting or denying the findings, hagerman consented to the sanctions and to the entry of findings that he failed to reasonably supervise his member firm's activities in that he allowed third-party wire transfers to be transmitted to and from customer accounts without any meaningful review, allowed numerous customer accounts to remain open and unrestricted despite missing customer identification documentation, allowed branch managers to approve trades without meaningful review, even when the accounts were flagged by the firm's electronic systems for exceeding thresholds designed to detect excessive trading, and performed insufficient due diligence on physical certificates and restricted securities. The findings stated that hagerman also failed to establish and maintain a reasonable supervisory system to review and verify new account opening documents, monitor and investigate trade exception alerts, monitor and review deliveries and deposits of stock certificates, monitor and review third-party wire transfers, and monitor and review the firm's acceptance and resale of restricted securities. As the firm's president, hagerman was ultimately responsible for supervision at the firm, and was also the designated supervisor of the firm's branch managers and its ceo. In addition, as the firm's cco, hagerman was responsible for establishing, implementing, and maintaining the firm's supervisory system and wsps. The firm's supervisory procedures also designated hagerman as individually responsible for numerous supervisory reviews. The findings also stated that while acting as the firm's cco and amlco, hagerman failed, however, to tailor the firm's aml policies and procedures to address the money-laundering risks specific to the firm's business. The procedures failed to identify the aml-related compliance role(s) firm principals would fulfill, identify individual(s) responsible for monitoring accounts for suspicious activity, and include specific guidelines for detecting and reporting suspicious activity. Hagerman also failed to implement any electronic systems or reports that were reasonably designed to identify potentially suspicious activity. Hagerman also failed to reasonably investigate potentially suspicious activity, including liquidations of low-priced securities, even when he was notified of the potentially suspicious activity by the firm's clearing firm. The findings also included that hagerman was the firm's ceo supervisor and hagerman was the firm's president and cco at the time, and he knew that the firm's ceo was selling convertible promissory notes to investors. Hagerman failed to supervise the ceo's private securities transactions. Specifically, hagerman failed to supervise the sales, ensure that the notes were recorded on the books and records of the firm, or ensure that the ceo requested and received approval of the transactions in writing from the firm. The firm's ceo sold approximately $1.8 million in convertible promissory notes issued by the firm's parent company to investors, some of whom were firm customers. He received expense reimbursements in connection with the sales, and a portion of his compensation was paid with the proceeds of the sales. Finra found that hagerman willfully failed to disclose civil judgments totaling $13,028 on his form u4. Hagerman was responsible for inputting form u4 and u5 updates into the crd on behalf of the firm and its employees. In spite of hagerman's experience reporting unsatisfied judgments and liens on the form u4, hagerman failed to disclose on his form u4 the civil judgments entered against him.
