The Financial Industry Regulatory Authority (FINRA), the largest independent regulator for all securities firms doing business in the United States, today fined the US broker-dealer Summit Brokerage Services $558,000 for a handful of violations and failures.
The core allegations are centered around the broker’s excessive trading in 14 customer accounts, including seniors and customers whose risk tolerances and investment objectives should have otherwise prohibited such problematic trading.
For instance, Wall Street’s industry-funded watchdog found that a former registered representative, who was previously barred by the regulator, placed 533 trades for a retired customer over three years, causing her to pay more than $171,000 in commissions. The FINRA identified a similar pattern of unsuitable trading that caused hundreds of thousands of dollars in unjustified commissions paid by customers.
Summit agreed to pay restitution to affected customers
In addition to violating the customers’ investment objectives, FINRA found that Summit failed to supervise its staff’s use of “consolidated reports,” which are provided to customers summarizing their financial holdings, including assets held away from the firm.
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In the end, the FINRA charged Summit with failing to address 150 of flagged trades in regards to the banned trader and failed to establish a supervisory system for securities trading.
As part of the settlement, Summit agreed to notify affected clients of the disciplinary proceedings and that they were charged a higher fee than they should have paid.
“Summit agreed to pay restitution to affected customers in the amount of the commissions they were charged as a result of the excessive trading,” it further explains.
“In this matter, the affected customers paid hundreds of thousands of dollars in commissions as a result of the excessive trading that occurred in their accounts,” added Susan Schroeder, FINRA’s executive vice president of Enforcement Department.