Wednesday, October 29, 2008
FINRA has imposed a $250,000 fine against J.P. Turner & Company, LLC of Atlanta, GA, for failing to have an adequate supervisory system designed to ensure that its registered representatives charged customers fair and reasonable commissions on stock trades. As part of the settlement, FINRA ordered J.P. Turner to retain an independent consultant to conduct a comprehensive review of the adequacy of the firm's policies, systems, procedures, and training relating to FINRA's Fair Pricing Rule.
FINRA requires firms to implement a system and reasonable procedures to ensure that customers are fairly charged for transactions, taking into consideration all relevant factors. FINRA's mark-up policy lists seven factors for firms to consider: the type of security involved; the availability of the security in the market; the price of the security; the size of the transaction; disclosure to the customer; the pattern of the firm's mark-ups; and, the nature of the firm's business.
FINRA found that between January 2002 and March 2005, J.P. Turner's supervisory system and written procedures failed to take these factors into account and failed to provide adequate guidance to its registered representatives to determine a fair commission or mark-up on equity securities transactions. Instead, representatives had discretion to establish the commission on such transactions, limited only by whether the price of the security was above or below $25 per share. On all equity securities transactions in which the price of the security was below $25, registered representatives were allowed to charge up to 4.5%, while they could only charge up to 3.5% if the price of the security was above $25. During the review period, 91% of the firm's equity securities transactions involved securities priced below $25 per share.
In concluding this settlement, J.P. Turner neither admitted nor denied the charges, but consented to the entry of FINRA's findings.