Financial Firm Agrees to Sanction for Failure to Establish and Maintain Supervisory System
According to a Letter of Acceptance, Waiver and Consent published by Financial Industry Regulatory Authority (FINRA), Summit Brokerage Services, Inc. (Summit) “failed to establish and maintain a supervisory system, and failed to enforce written supervisory procedures (“WSPs”), that were reasonably designed to achieve compliance with FINRA’s suitability rule as it pertains to excessive trading.” The brokerage firm was censured and fined $325,000 as well as ordered to pay restitution to customers affected by the failure to supervise. Restitution in the amount of $558,296.44 was ordered to be paid to Summit customers who allegedly realized significant losses.
Summit, despite having a system set up to receive trade alerts, notifying the firm of excessive trading related to portfolio turnover and cost-equity ratios in commission-based accounts, failed to feed the information for review. One employee generated over “150 alerts for potentially excessive turnover rates and cost-to-equity ratios” that were never reviewed by the firm, causing customer losses in excess of half a million dollars.
Excessive trading and churning are never in the best interest of an investor. Investors rely on their financial advisors and their firms to protect their assets and make only suitable investment recommendations. When a broker excessively trades or churns an investor’s account, that investor may be able to recover his or her losses through a FINRA arbitration. Financial institutions and investment firms owe their clients a duty to properly supervise their financial advisors and make sure that they recommend and sell only suitable investments and also not excessively trade customers’ accounts. If a firm fails to adequately supervise its agents and customers suffer financial losses, that firm may be liable to the customers for such losses.
If you believe that you suffered losses with Summit Broker Services or any other brokerage firm as a result of excessive trading or churning, contact Levin Law for a free case evaluation to determine whether you may be able to recover your losses through a FINRA arbitration. Levin Law has recovered millions for victims of securities and investment fraud. Call Levin Law today for a free initial case consultation at (305) 402-9050.
