Broker Settles FINRA Charges for Reg BI Violations

A broker settled FINRA charges for failing to comply with Regulation Best Interest by recommending customers use commission-based accounts for a short-term strategy when lower-cost fee-based options were available.

According to the AWC, the broker recommended that 19 retail customers, including 13 seniors, implement a short-term trading strategy using commission-based brokerage accounts rather than their existing fee-based advisory accounts. FINRA found that the broker’s strategy, which involved buying stocks in December to sell in January, caused the customers to incur approximately $121,725.58 in unnecessary commissions. FINRA stated that these costs would have been avoided had the trades been placed in the customers' advisory accounts.

FINRA found the broker violated Exchange Act Rule 15l-1 ("Regulation Best Interest") and FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade").

To settle the matter, the broker agreed to a seven-month suspension from associating with any FINRA member in all capacities. FINRA did not impose a monetary sanction because the broker had been granted a discharge in bankruptcy.