BD to Pay Over $2 Million for Allowing Automated System to Charge Excessive Commissions
FINRA ordered a national broker-dealer to pay $1.69 in restitution and another $425,000 in fines for allowing its automated system to charge “unfair and unreasonable” commissions on “low-priced” securities. FINRA charges that the automated system charged excessive commissions on over 27,000 transactions during a 5-year period. FINRA faulted the firm’s inadequate supervisory system which failed to “determine the fairness of the commissions, including the type of security and the size of the transaction.”
OUR TAKE: A broker’s obligations do not end with suitability. Buy-side firms should consider questioning how the sell side sets their commission rates.