The Financial Industry Regulatory Authority announced today that it has ordered New York City-based Aegis Capital Corp. to pay approximately $2.8 million, including $1.7 million in restitution to 68 customers whose accounts were potentially “excessively and unsuitably traded” by the firm’s representatives. Finra also imposed a $1.1 million fine for Aegis’s supervisory violations.
Finra found that Aegis supervisors failed to detect or act on information that eight Aegis reps excessively and unsuitably traded customer accounts over a period of more than four years, generating $2.9 million in trading costs that would have required the investments to generate more than 71% returns to offset costs, Finra said in a statement today.
In addition, Finra found that from July 2014 to December 2018, Aegis failed to implement a supervisory system reasonably designed to comply with Finra’s suitability rule. As a result, Aegis failed to identify and address its representatives’ potentially excessive and unsuitable trading in customer accounts, including trading by eight Aegis representatives who excessively traded 31 customers’ accounts,” the regulator said.
In settling this matter, Aegis and two of its supervisors “accept and consent to the entry of Finra’s findings without admitting or denying them,” the regulator said.
When asked for comment, an unidentified female answering Aegis’s New York City headquarters answered “No comment,” and abruptly disconnected the call.
The breaches came to light during an examination of the firm and a review of a customer’s arbitration complaint.
The firm failed to act on more than 900 exception reports generated by its clearing firm that identified potentially unsuitable trading and more than 50 complaints from customers alleging excessive and unsuitable or unauthorized trading in their accounts, Finra found.
“Aegis, and designated supervisors Joseph Giordano and Roberto Birardi, failed to take reasonable steps to investigate numerous ‘red flags’ indicative of potentially excessive and unsuitable trading by the firm’s registered representatives,” Finra said.
Giordano and Birardi, who were responsible for supervising six of the representatives, failed to respond to 700 of the 900 exception reports, Finra said.
Even when compliance personnel identified deficiencies in the firm’s systems and procedures used to monitor for potentially excessive trading, “Aegis did not promptly address the deficiencies or improve its supervision,” the regulator said.