FINRA Imposes First Fine For Reg BI Violation

Posted on October 26th, 2022 at 1:53 PM
FINRA Imposes First Fine For Reg BI Violation

From the Desk of Jim Eccleston at Eccleston Law.

The Financial Industry Regulatory Authority (FINRA) has issued a six-month suspension and a $5,000 fine to a former financial advisor in the regulator’s first disciplinary action related to Regulation Best Interest (Reg BI).

The former advisor, Charles Malico, violated Reg BI’s Care Obligation “by recommending a series of transactions in the account of one retail customer that was excessive in light of the customer’s investment profile and therefore was not in that customer’s best interest”, between July 2020 and November 2021, according to FINRA. According to BrokerCheck, Malico worked for Network 1 Financial Securities in Huntington Station, New York, at the time of the violation. The client, whose average account balance was less than $30,000, is a 63-year-old tax preparer with an annual income of around $100,000. According to FINRA, Malico recommended that the client make at least 350 trades in his account, which required the client to pay nearly $54,000 in commissions and other costs.

FINRA’s complaint alleged that Malico “frequently recommended” that the client buy and then subsequently sell a security, only to repurchase the same security within weeks. For instance, Malico recommended that the client buy and then subsequently sells shares of the same biotechnology company on six separate occasions between January and July 2021. According to FINRA, Malico’s recommendations “resulted in an annualized cost-to-equity ratio exceeding 158% — meaning that [the customer’s] account would have had to grow by more than 158% annually just to break even. Thus, Malico’s recommendations made it virtually impossible for [the customer] to realize a profit and, in fact, [the client] lost more than $17,500 during the relevant period.”

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, regulatory and disciplinary matters.

Tags: eccleston, eccleston law, advisors, law, finra

Return to Archive

TESTIMONIALS

Previous
Next

Jim, Stephany and the whole team were a God send.  We felt like we were put into a situation where we had no advocate. Jim’s team came in with a strong, well laid out strategy on how to get our story heard. Where our outside compliance company had no ability to help, our Broker Dealer was impenitent, and the regulators were aggressive pursuing vague rules, Jim came like a barricade against an assault we did not understand. Though you pay member dues to be affiliated with FINRA and a B/D, you have no voice. The only thing that is truly heard in this un-level playing field is a bulldog’s bark like Jim’s. I would encourage anyone to call Jim and his team to find a real ally in the tough and complicated world of securities regulation. They are truly the best.

Greg P.

LATEST NEWS AND ARTICLES

February 14, 2025
Jefferies Financial Group Dismisses Miami Advisory Team Amid Alleged Misconduct

Jefferies Financial Group recently terminated a team of Miami-based wealth advisors following allegations of improper money transfers and the use of unauthorized communication methods to conceal the activity.

February 13, 2025
FINRA Panel Denies J.P. Morgan's $39.7 Million Claim Against Former Advisor

A FINRA arbitration panel recently rejected J.P. Morgan Securities’ bid to recover $39.7 million in damages from Edward Turley, a former financial advisor whose alleged
misconduct led the firm to incur significant settlement costs.

February 12, 2025
Edward Jones Advisor Barred by FINRA Over Allegations of Unauthorized Account Changes

FINRA has barred Gwendolyn J. Hayes, a former Edward Jones advisor in Oregon after allegations surfaced that she altered client account information without authorization.