The Financial Industry Regulatory Authority has suspended a rep for five months and ordered him to pay more than $27,000 in restitution for excessive and unsuitable trading in three clients' accounts, two of whom were older adults, violating Regulation Best Interest.
According to FINRA's order, between September 2018 and December 2020, Matthew Turner, while working at WestPark Capital Inc., also exercised discretionary authority to make 148 trades in four customers' accounts without obtaining their written authorization and without his firm having accepted the accounts as discretionary, in violation of NASD Rule 2510(b) and FINRA Rules 3260(b) and 2010.
As the order states, violation of Reg BI or FINRA Rule 2111 also is a violation of FINRA Rule 2010, which requires associated persons to "observe high standards of commercial honor and just and equitable principles of trade" in the conduct of their business.
In August 2018, one of the customers, who was 71 years old, and another, who was then 63 years old, "opened a joint account with Turner at WestPark."
The customers "relied on Turner's advice and routinely followed his recommendations and, as a result, Turner exercised de facto control over the customers' account," the order states.
Between September 2018 and March 2020, Turner placed 72 trades in the joint account.
"During this period, the trading in the joint account generated $9,613.76 in commissions and resulted in realized losses of $115,183, an annualized turnover rate of 13.01, and an annualized cost-to-equity ratio of 50.49%," according to FINRA.
The high cost-to-equity ratio meant the account would have to grow by more than 50% annually just to break even. "This level of trading was excessive and unsuitable," the order states.
In August 2018, the third customer opened an account with WestPark. Between October 2019 and December 2020, Turner placed 110 trades in the customer's account.
"During this period, the trading in the account generated $24,655.93 in commissions and resulted in realized losses of$45,639, an annualized turnover rate of 9.04, and an annualized cost-toequity ratio of27.58%," the order states.
"The high cost-to equity ratio meant the customer's account would have to grow by more than 27% annually just to break even. This level of trading was excessive, unsuitable, and not in the customer's best interest," FINRA said.
Credit: Chris Nicholls/ALM
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