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November 09, 2021 at 04:23 PM
What You Need to Know
- Aegis Capital Corp. faces about $2.8 million in FINRA sanctions, including $1.7 million in restitution.
- Supervisors failed to respond to 700 of the 900 exception reports.
- Recognizing and responding to red flags is the hallmark of proper supervision, said enforcement head Hopper.
The Financial Industry Regulatory Authority said Tuesday that it has sanctioned Aegis Capital Corp. approximately $2.8 million, including $1.7 million in restitution, to 68 customers whose accounts were potentially excessively and unsuitably traded by the firm’s reps.
FINRA also imposed a $1.1 million fine for Aegis’ supervisory violations.
FINRA said the case originated from its exam of the firm and a review of a customer’s arbitration complaint.
From July 2014 to December 2018, Aegis failed to implement a supervisory system reasonably designed to comply with FINRA’s suitability rule.
“As a result, Aegis failed to identify and address its representatives’ potentially excessive and unsuitable trading in customer accounts, including trading by eight Aegis representatives who excessively traded 31 customers’ accounts,” the order states.
“The trading in these accounts generated average cost-to-equity ratios — that is, the amount the accounts must increase in value just to cover commissions and other trading expenses — of 71.6%, and caused the customers to incur more than $2.9 million in trading costs,” FINRA said.
Aegis, and designated supervisors Joseph Giordano and Roberto Birardi, failed to take reasonable steps to investigate numerous “red flags” indicative of potentially excessive and unsuitable trading by the firm’s registered reps, according to FINRA.
