SEC, Not FINRA, Brings Churning Case Against 2 Brokers
The SEC charged two brokers with churning and excessive trading in customer accounts. The SEC accuses the brokers of engaging in excessive short-term trading that had little chance of benefiting customers after payment of fees. Both brokers, who had significant disciplinary histories, used telemarketing and cold-calling to find clients who they pressured with pre-filled agreements and margin arrangements. An SEC official commented, “This case marks another chapter in the SEC’s pursuit of brokers who deploy excessive trading as a strategy in customer accounts to enrich themselves at customers’ expense.”
OUR TAKE: It is very unusual for the SEC to bring suitability and churning cases against individual brokers. These types of cases are usually FINRA’s jurisdiction. Perhaps this is the beginning of the SEC moving to regulate retail brokers in response to the DoL fiduciary rule.