FINRA Sanctions Supervisor for Failing to Address Excessive Trading Red Flags

Posted on September 25th, 2024 at 11:33 AM
FINRA Sanctions Supervisor for Failing to Address Excessive Trading Red Flags

From the desk of Jim Eccleston at Eccleston Law

FINRA has acted against an Independent Financial Group (IFG) supervisor for failing to respond to red flags involving excessive trading in five customer accounts.

According to AdvisorHub, a California advisor involved allegedly generated $2.2 million in fees and incurred an additional $2.2 million in customer losses through excessive trading. The advisor in question, who previously agreed to a $50,000 fine and $115,000 in restitution, engaged in a pattern of buying and quickly selling large equity positions while charging commissions of up to 3 percent. One of the affected customers was an elderly individual with Alzheimer’s. The trading activities led to cost-to-equity ratios as high as 27 percent, making it nearly impossible for clients to realize any profit.

The supervisor settled the matter in what is known as an Acceptance, Waiver, and Consent (“AWC”), neither admitting nor denying wrongdoing, but agreeing to a $5,000 fine and a four-month suspension.

FINRA determined that the supervisor’s failure to act violated FINRA Rule 3110, which requires firms to establish a reasonably designed supervisory system, as well as Rule 2010, a general standard of conduct.

 

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

Tags: eccleston, eccleston law, finra

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