Broker-Dealer Settles FINRA Charges for Misleading Communications
Commentary by Sebastian Souchet
A broker-dealer settled FINRA charges for disseminating misleading claims about the firm's services and performance.
FINRA found that the firm made unsubstantiated assertions on its website about offering "lower" or the "lowest" trading and margin costs, without any explanation of how these conclusions were reached or providing data to support them. Further, FINRA found that the firm highlighted outdated awards and commendations and made claims about offering "deep discount commissions" based on old data.
FINRA also found that the firm misrepresented it's experience and services, claiming that "most of our financial professionals have over ten or even twenty years of experience" and that the firm offers "experienced full-service financial consultants," despite the fact that the firm only had one registered representative available to assist clients. FINRA found that the firm's website included unqualified statements promising to help clients achieve a "comfortable retirement," which FINRA identified as improperly promissory and not contingent upon clients' individual circumstances or market conditions.
FINRA said it warned the firm about these issues in October 2020, but found that the firm did not address the problematic statements until November 2023.
As a result, FINRA concluded that the firm violated FINRA Rules 2210 ("Communications with the Public") and 2010 ("Standards of Commercial Honor and Principles of Trade").
To settle the charges, the firm agreed to (i) a censure, (ii) pay a $10,000 fine and (iii) an undertaking to take corrective measures, including removing the misleading content and revamping its website.
Commentary
This is the second enforcement action by FINRA in less than a month that concerns a broker-dealer's failure to comply with FINRA Rule 2210's general content standards with respect to the broker-dealer's retail communications (see related coverage). Indeed, FINRA identified compliance with FINRA Rule 2210's requirements as a regulatory priority in its 2024 FINRA Annual Regulatory Oversight Report (see pp. 39-43; see also related coverage), and highlighted the standards thereunder as a particular regulatory consideration for firms.
This enforcement action also serves to remind broker-dealers that all of their communications with the public—i.e., communications both to "retail investors" and to "institutional investors" (as those terms are defined under FINRA Rule 2210)—are subject to FINRA Rule 2210's general content standards. Firms should review all claims made on their websites including, among other things, by providing a sound basis for evaluating such claims.