Broker-Dealer Settles FINRA Charges for Unreasonable Commissions on Small Trades

A broker-dealer settled FINRA charges for implementing an unreasonable commission system on small dollar transactions and related supervisory failures.

In a Letter of Acceptance, Waiver, and Consent, FINRA stated that the broker-dealer unfairly imposed a dollar amount minimum commission on small dollar transactions, passing onto customers commissions of between 5 and 93 percent of the transactions' total value. FINRA found that customers were overcharged an average of $37 in commission per transaction, and the broker-dealer accumulated over $266,000 in total unfair commissions.

FINRA found that the broker-dealer did not consider appropriate factors when establishing the minimum commission amount. FINRA concluded that the broker-dealer's supervisory policy regarding commissions was inadequate because instances where customers were charged the minimum rate weren't flagged, even in instances where the commission charged was beyond the firm's established 5 percent commission threshold.

As a result, FINRA determined that the broker-dealer violated FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade"), Rule 2121 ("Fair Prices and Commissions") and Rule 3110 ("Supervision").

To settle the charges, the broker-dealer agreed to (i) a censure, (ii) a civil monetary penalty of $150,00 and (iii) restitution of $266,481 plus interest to affected customers.