FINRA cracks down on broker-dealers for excessive handling fees

Posted by RJ & Makay on September 9, 2011

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FINRA cracks down on broker-dealers for excessive handling fees

The Financial Industry Regulatory Authority (FINRA) on Wednesday announced that it has  levied fines against five broker-dealers, totaling nearly $1 million, for gouging clients in “postage and handling” fees. FINRA said that the five firms were “understating the amount of total commissions charged to customers in trade confirmations and fee schedules by characterizing a portion of the commission charges as fees for handling services.”

In some cases, customers were charged upwards of $100 per transaction for handling fees, and firms earned a substantial portion of their revenues from these fees.

“Trade confirmations and fee schedules must clearly reflect commission charges, and firms cannot disguise commissions by improperly describing them as charges for ancillary services,” said Brad Bennett, chief of enforcement at FINRA.

FINRA sanctioned the following firms:

  • Point Capital, Inc. (nka JHS Capital Advisors, Inc.). The Boca Raton, Florida firm was fined $300,000. The firm charged customers a handling fee as high as $95 per trade in addition to a commission.  It was also sanctioned for inadequate supervisory procedures.
  • John Thomas Financial.  The New York City broker-dealer was fined $275,000.  The firm charged customers a handling fee upwards of $75 per trade in addition to a commission.  The company was found to have deficiencies in complaint reporting, supervisory controls and certifications, branch office supervision and recordkeeping.
  • First Midwest Securities, Inc.  The Bloomington, Illinois firm was fined $150,000.  It charged customers a handling fee as high as $99 per trade on top of the commission.  The company was also sanctioned for unfair and unreasonable markups/markdowns and inadequate written supervisory procedures.
  • A&F Financial Securities, Inc.  The Syosset, New York broker-dealer was fined $125,000.  The firm charged customers a handling fee as high as $65 per trade in addition to a commission.  The company had an inadequate supervisory system and procedures, and failured to comply with a continuing education requirement. 
  • Salomon Whitney LLC.   The Babylon Village, New York firm was fined $60,000 for charging its customers a handling fee upwards of $69 per trade in addition to a commission. 

In settling the actions, the broker-dealers agree to remedy the handling-fee overcharges, supervisory and other violations.  The firms neither admitted nor denied the charges, but agreed to the entry of FINRA’s findings.    

RJ & Makay

 

Source:

 

FINRA goes postal on five brokerages for high ‘handling’ fees (http://www.onwallstreet.com/news/finra-fines-brokerage-for-excessive-postal-fees-2675003-1.html).  On Wall Street, September 7, 2011

FINRA fines 5 brokerage firms for improper fees (http://www.businessweek.com/ap/financialnews/D9PJTD180.htm).  Bloomberg Businessweek, September 7, 2011

FINRA fines five broker-dealers for improper handling fees (http://www.finra.org/Newsroom/NewsReleases/2011/P124283).  FINRA Press Release, September 7, 2011

 



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