BD to Pay $1.5M Over Excessive Trading by Reps: FINRA

What You Need to Know

Western failed to comply with suitability requirements of FINRA Rule 2111 as they pertain to excessive trading.
The BD failed to reasonably respond to trading in about 100 accounts that appeared unsuitable.
One rep excessively traded the accounts of a senior client by directing hundreds of in-and-out trades, costing the individual $1.5 million.

The Financial Industry Regulatory Authority has fined Western International Securities $1.5 million for excessive trading by four registered representatives in nine clients’ accounts resulting in $2.5 million in trading costs.

According to FINRA’s order, from January 2016 through June 2020, Western failed to establish, maintain, and enforce a supervisory system, including written supervisory procedures (WSPs), reasonably designed to achieve compliance with the suitability requirements of FINRA Rule 2111 as they pertain to excessive trading.

As a result, Western failed to reasonably respond to trading in about 100 client accounts that appeared to be potentially excessive and unsuitable, FINRA’s order states.

“This included trading, between January 2016 and December 2019, in nine customer accounts by four registered representatives that produced an average cost-to-equity ratio of 30%, an average turnover rate of 8, and caused those customers to pay total trading costs of more than $2.5 million,” according to the the order.

Western was censured and ordered to pay a $475,000 fine as well as $1.1 million in restitution plus interest.

Order Details

From January 2016 through June 2020, Western failed to have a supervisory system that was reasonably designed to ensure compliance with applicable securities laws and regulations and with FINRA rules prohibiting excessive trading, including FINRA Rule 2111.

“Western’s WSPs and trade-blotter-based surveillance were not reasonably designed to detect excessive trading,” the order said.