The Financial Industry Regulatory Authority has suspended a former Stifel broker for seven months for placing older clients' trades in commission-based brokerage accounts rather than less expensive fee-based advisory accounts. The actions violated Regulation Best Interest.
According to FINRA's order, from November 2023 to December 2023, Jonathan M. Webster recommended that 19 customers, at least 13 of whom were seniors, implement a short-term strategy that involved buying stocks in commission-based brokerage accounts rather than in the customers' existing fee-based advisory accounts.
In November 2023, Webster recommended that these clients open or use existing commission-based brokerage accounts "to execute a 10-stock short-term strategy he called the 'January Effect,'" the order states.
Collectively, Webster's trades in the customers' brokerage accounts required them to pay nearly $122,000 in unnecessary commissions.
The strategy involved buying stocks in December and selling them after the new year to profit from his predicted January bump in price, according to the order.
"Although Webster could have recommended his customers buy the stocks in their existing fee-based advisory accounts at a lower comparative cost, Webster recommended that the customers open new or use existing brokerage accounts to implement the strategy," FINRA explained.
On Dec. 26 and 27, 2023, Webster bought the same 10 stocks in each of the customers' brokerage accounts.
The matter originated from a Form U5 filed by Stifel in January 2024, terminating Webster for placing trades "for customers in newly-opened commission-based accounts that should have been placed in existing fee-based accounts," BrokerCheck states.
FINRA suspended the rep for seven months but didn't impose a monetary penalty because he filed for bankruptcy in April, according to his BrokerCheck profile.
In January 2024, "Stifel identified Webster's misconduct, refunded all commissions to customers, and rebilled the trades to their advisory accounts," according to FINRA.
"As a result, the customers did not pay any unnecessary charges, and Webster did not retain any commissions for the trades at issue," according to the order.
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