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Regulation and Compliance > Federal Regulation > FINRA

FINRA Fines 5 Broker-Dealers

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Five broker-dealers were fined by FINRA, the authority announced Wednesday, for understating the amount of total commissions they charged to customers in trade confirmations and on fee schedules. The BDs were accused of mischaracterizing a portion of the commission charges as fees for handling services.

According to FINRA, the handling fees were meant to provide a source of additional transaction-based revenue for the firms and were far higher than the cost of the handling-related services provided by those firms. Some of the firms were also charged with additional violations.

The firms and their fines were: Pointe Capital (now known as JHS Capital Advisors), Boca Raton, Fla., $300,000; John Thomas Financial, New York, $275,000; First Midwest Securities, Bloomington, Ill., $150,000; A&F Financial Securities, Syosset, N.Y., $125,000; and Salomon Whitney, Babylon Village, N.Y., $60,000. The firms charged clients handling fees ranging from $65 to $99 per trade, in addition to a commission.

The firms neither confirmed nor denied the charges, but in settling FINRA’s actions, consented to the entry of the findings and agreed to implement corrective action to remedy the handling fee-related violations.

The authority said that, in addition to taking corrective action, the firms had also agreed to “fully and accurately disclose the specific service performed and the related fee on confirmations and any other communications with a customer where fees are discussed.

“In addition, they will identify all transaction-based remuneration as commissions or mark-ups (mark-downs) rather than as postage, handling or any other miscellaneous fee. The firms also agreed to revise their written supervisory procedures and to provide training to the firms’ registered representatives and associated persons related to transaction-based remuneration, reasonable fees, their appropriate disclosure to customers and retention of related records.”

In a statement, Brad Bennett, FINRA executive vice president and chief of enforcement, said, “Trade confirmations and fee schedules must clearly reflect commission charges, and firms cannot disguise commissions by improperly describing them as charges for ancillary services. FINRA will continue to look closely at any firms that engage in these practices.”


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