Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

A Member of the Law Professor Blogs Network

Wednesday, September 7, 2011

FINRA Fines 5 Firms for Improper Handling Fees

The FINRA fined five broker-dealers for understating the amount of total commissions charged to customers in trade confirmations and on fee schedules by mischaracterizing a portion of the commission charges as fees for handling services. With respect to each of these firms, the handling fees were designed to serve as a source of additional transaction based remuneration for the firm and were far in excess of the cost of the handling-related services the firms provided.

The cases resulted from a targeted review of improper fees charged by broker-dealers in which FINRA found that the firms were routinely charging customers for handling fees that far exceeded the actual cost of the direct handling-related services the firms incurred in processing securities transactions. In some cases, firms charged a handling fee of almost $100 per transaction and earned a substantial percentage of their revenue from these fees.

FINRA sanctioned the following firms:

  • Pointe Capital, Inc. (nka JHS Capital Advisors, Inc.), of Boca Raton, Florida, was fined $300,000. The firm charged customers a handling fee as high as $95 per trade in addition to a commission. (Additional violations included inadequate supervisory procedures.)
  • John Thomas Financial, of New York, NY, was fined $275,000. The firm charged its customers a handling fee as high as $75 per trade in addition to a commission. (Additional violations included effecting material changes in its business operations without prior approval from FINRA, and deficiencies in complaint reporting, supervisory controls and certifications, branch office supervision and recordkeeping.)
  • First Midwest Securities, Inc., of Bloomington, IL, was fined $150,000. The firm charged customers a handling fee as high as $99 per trade in addition to a commission. (Additional violations included unfair and unreasonable markups/markdowns and inadequate written supervisory procedures.)
  • A&F Financial Securities, Inc., of Syosset, NY, was fined $125,000. The firm charged its customers a handling fee of $65 per trade in addition to a commission. (Additional violations included inadequate supervisory system and procedures, and failure to comply with continuing education requirement.)
  • Salomon Whitney LLC, of Babylon Village, NY, was fined $60,000. The firm charged its customers a handling fee as high as $69 per trade in addition to a commission.

In settling FINRA's actions, the firms agreed to implement corrective action to remedy the handling fee-related violations. In concluding these settlements, the firms neither admitted nor denied the charges, but consented to the entry of FINRA's findings.

http://lawprofessors.typepad.com/securities/2011/09/finra-fines-5-firms-for-improper-handling-fees.html

Other Regulatory Action | Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef0154353b0d7e970c

Listed below are links to weblogs that reference FINRA Fines 5 Firms for Improper Handling Fees:

Comments

Post a comment