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Dominic Baldini: Emerson Equity Rep Fined over Mutual Fund Charges
San Mateo stockbroker Dominic Baldini (CRD# 3082081) was recently sanctioned by the Financial Industry Regulatory Authority after the regulator found he failed to reasonably supervise mutual fund trading. Currently a representative of Emerson Equity, he was fined and temporarily suspended from acting in a principal capacity.
According to a Letter of Acceptance, Waiver and Consent (No. 2020066078202) issued in December 2021, Mr. Baldini was registered with Emerson Equity when, between 2015 and 2020, he and the firm “”failed to establish, maintain, and enforce a supervisory system” designed to achieve compliance with FINRA’s suitability rules connected to the short-term trading of mutual fund Class A and Class B shares.The Letter states that FINRA Rule 2111 requires firms and their associated persons to “have a reasonable basis to believe” that the investments or strategies they recommend are suitable for their customers, a determination they make by conducting due diligence regarding the customer’s investment profile. FINRA states that Mr. Baldini held responsibility over the development and enforcement of the firm’s supervisory procedures for mutual fund trading, as well as the supervision of the use of exception reports. Although these reports “were supposed to be reviewed on a daily or monthly basis depending on the report,” FINRA states, “Emerson did not make use of any exception reports with respect to mutual fund trading.”
The sanction specifically concerns Mr. Baldini’s supervision—or alleged lack thereof—of a representative who conducted “substantial” mutual fund trading, of which the firm’s supervision “was unreasonable.” That is, the firm “relied solely on Baldini’s manual review of a daily order/traded status report” that allegedly lacked the necessary information to supervise mutual fund trading: for instance, the fund’s share class, the sales charges incurred by a transaction, the holding period, and the customer’s investment profile. Because the firm’s supervisory prcedures were not designed in such a manner that allowed the firm or Mr. Baldini “to identify the pattern of mutual fund charges” incurred by the representative’s clients, the firm and Baldini “failed to detect” that representative’s misconduct for at least five years.
That alleged misconduct, according to FINRA, included the recommendation and execution of “667 unsuitable, short-term mutual fund transactions, including switches, in mutual fund Class A and Class B shares in 31 accounts owned by 22 customers.” The transactions allegedly caused the customers to incur sales charges of more than $1.6 million. FINRA notes that Class A and Class B mutual fund shares are generally unsuitable for short-term trading: Class A shares because they have significant upfront costs and because they often incur charges if redeemed early; and Class B shares because they also incur “significant” charges if sold “within a certain period after purchase, generally up to seven years.” FINRA notes that this representative was barred from associating with FINRA member firms in July 2020.
As a result of these findings, FINRA ordered Mr. Baldini to pay a fine of $5,000 and suspended him from associating with any FINRA member firm in a principal capacity for 20 days.
According to the Financial Industry Regulatory Authority, Dominic Baldini holds 22 years of securities industry experience. He is presently registered as a broker and investment adviser with Emerson Equity in San Mateo, California. His past registrations include Sharespost Financial Corporation (San Francisco, California; 2011-2016), Pacific Coast Securities (Astoria, New York; 2001-2004), and Golden Triangle Securities (Carmel, California; 1999-2001). His credentials include the passage of nine securities industry examinations and he holds 32 state licenses. (Information current as of March 2, 2022.)
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