Broker-Dealer Fined for Charging Excess Fees

A broker-dealer settled FINRA charges for failing to supervise two registered representatives who overcharged commissions to clients.

In a Letter of Acceptance, Waiver, and Consent, FINRA found that a father and son, both registered representatives of a firm, overcharged several foreign institutional clients. FINRA found that the representatives manipulated rates by contacting the trading desk after placing an order, but prior to execution, and requesting that the commission be increased despite having already negotiated a per-share commission rate with the clients. FINRA said that the representatives then falsified the trade confirmations to conceal their misconduct.

FINRA found that the firm's internal systems flagged the representatives' activities, but that the firm failed to respond to the red flags, thereby allowing the representatives to collect over $2.4 million in excess fees. Additionally, FINRA found that the firm failed to oversee a separate instance where a representative made unapproved changes to the name or designation of an account.

FINRA determined that the firm violated FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade"), Rule 3110 ("Supervision") and Rule 4515 ("Approval and Documentation of Changes in Account Name or Designation"). To settle the charges, the adviser agreed to (i) a censure and (ii) a $300,000 civil monetary penalty. The broker-dealer also agreed to (i) a censure, (ii) an $800,000 civil monetary penalty and (iii) restitution of $48,574 plus interest.