FINRA Bars Broker Over Reg BI Violations

The Financial Industry Regulatory Authority has barred a broker for excessive churning in the accounts of multiple customers, resulting in more than $2.3 million in losses and thereby violating the Securities and Exchange Commission’s Regulation Best Interest.

According to FINRA’s order, between July 2020 and July 2021, Christopher Kennedy churned and excessively traded four accounts of six customers as a registered rep of Western International Securities.

“Kennedy used his control over these accounts to direct an excessive series of transactions in each account that generated commissions for his own benefit at the customers’ expense,” the order states.

In all, between July 2020 and July 2021, Kennedy directed over 5,300 trades representing net trading of more than $350 million in the four accounts of six customers, the order states.

“Each month, Kennedy made an average of 102 trades per account representing net trading of more than $6.9 million per account or approximately 13 times the average account value,” according to FINRA.

Kennedy’s trading for six customers “resulted in annualized cost-to-equity ratios ranging from 27% to 39% for an average cost-to-equity ratio of more than 31% across all their accounts,” FINRA said.

Kennedy’s trading resulted in annualized turnover rates ranging from 31 to 58, for an average turnover rate of more than 47 across all their accounts, even excluding options purchases.

As the result of Kennedy’s excessive trading, “Customers 1–6 collectively lost over $2.3 million in value from their accounts and paid more than $715,000 in total trading costs and margin interest, including over $595,000 in commissions,” the order states.