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Regulation and Compliance > Federal Regulation > FINRA

FINRA Suspends Ex-Rep Over Reg BI Violations

By Melanie Waddell

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The Financial Industry Regulatory Authority has fined and suspended a former general securities representative for violating Regulation Best Interest’s Care Obligation by excessively trading in a client’s account.

While associated with Cantella & Co., Inc. of Owensboro, Kentucky, Robert Spaulding Gleason recommended a series of transactions in the account of a retail customer that was excessive in light of the customer’s investment profile and, therefore, was not in the customer’s best interest, the order states.

Between July 2020 and June 2021, while associated with Cantella, Gleason willfully violated the Best Interest Obligation under Rule 15l-1(a)(1) of the Securities Exchange Act and FINRA Rule 2010.

FINRA suspended Gleason for three months and issued a $5,000 fine.

The matter originated from FINRA’s cycle exam of Cantella.

At the time of the trading, “the customer was in her early sixties, and had an investment profile reflecting an income of $50,000 and a liquid net worth of $700,000,” the order states.

Gleason’s recommendations for the customer “involved a pattern of in-and-out, short-term trading, and Gleason failed to consider the cumulative costs of his trading,” FINRA said.

Between July 2020 and June 2021, Gleason effected 91 trades in the client’s account.

“Collectively, these trades resulted in a cost-to-equity ratio exceeding 28% — meaning that [the customer's] account would have had to grow by more than 28% during the 11-month period just to break even — and a turnover rate of 12.93,” the order states.

Although the client’s “average account balance during this period was approximately $101,000, Gleason effected the purchase of approximately $1.3 million in securities,” the order adds.

The client paid more than $28,000 in commissions and trade costs.

Melanie Waddell

@Think_MelanieW

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