FINRA Suspends Two New York Advisors Over Reg BI Violations

Posted on February 16th, 2023 at 4:24 PM
FINRA Suspends Two New York Advisors Over Reg BI Violations

From the Desk of Jim Eccleston at Eccleston Law

The Financial Industry Regulatory Authority (FINRA) has suspended two New York-based advisors for violating Regulation Best Interest (Reg BI). 

The two advisors, Todd Cirella and Edward Short, joined Laidlaw & Co. in 2004 and 2012, respectively. Short allegedly made recommendations to a 77-year old retail client and “exercised de facto control” over their account between July 2018 and December 2020, according to FINRA. FINRA accuses Short of recommending 204 transactions to the 77-year old client, generating $116,859 in commissions as well as $185,000 in trading losses, which constituted an annualized cost-to-equity ratio of 76.53% and an annualized turnover rate of 47.49. While there is no one test to determine whether trading is excessive, turnover rates of six or cost-to-equity ratios higher than 20% tend to point in that direction, according to FINRA. 

Similarly, Cirella advised a 60-year old retail client between June 2020 and January 2021 in which he also possessed de facto control over the client’s account, according to FINRA. Cirella allegedly recommended 46 trades for the client, which generated $27,566 in commissions as well as $12,000 in trading losses, which constituted an annualized cost-to-equity ratio of 37.65% and an annualized turnover rate of 20.39. In other words, the account had to grow at a rate of 37% per annum merely to break even. 

Short agreed to a seven-month suspension and will pay a $5,000 fine as well as $116,859 in restitution. Cirella consented to a three-month suspension and will pay a $5,000 fine and $27,566 in restitution. Each advisor consented to the penalties without admitting or denying any of FINRA’s investigatory findings. 

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

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