FINRA Imposes $600,000 Fine for Allowing Over-Concentration
FINRA fined a broker-dealer $600,000 for allowing unsuitable concentrations of CMOs in customer accounts. FINRA charged that the firm’s exception reporting system excluded large trades, allowing large CMO positions to build up in client accounts. FINRA charged that the firm failed to review these trades for suitability, concentration, excessive trading, or excessive mark-ups.
OUR TAKE: This case is notable because FINRA is saying that customer suitability includes an ongoing review of security concentration to ensure proper diversification. This expansive view of suitability is more of a fiduciary obligation than a point-of-sale suitability analysis.