Finra announced today that it has sanctioned Summit Brokerage Services for more than $880,000 for failing to supervise excessive trading in client accounts, especially trading by one representative already barred by Finra.
Boca Raton, FL-based Summit, a boutique broker-dealer which has more than 700 registered reps nationwide, has been ordered to pay $558,000 in restitution to customers whose accounts were excessively traded. At the heart of the matter, Summit failed to “reasonably” review automated trade alerts that would have notified the firm its brokers were excessive trading in client accounts, Finra said.
“In this matter, the affected customers paid hundreds of thousands of dollars in commissions as a result of the excessive trading that occurred in their accounts,” Susan Schroeder, Finra's Executive Vice President, Department of Enforcement, said.
“This enforcement action reflects the fact that obtaining restitution for harmed customers remains our highest priority,” Schroeder added.
A call placed to Summit for comment on the Finra censure was not immediately returned.
Finra found that from January 2012 through March 2017, Summit failed to review or take action on 150 automated trade alerts impacting 14 clients.
As a result, the firm failed to detect that one rep in particular, identified by Finra only as “CJ,” excessively traded securities in all 14 of the customers’ accounts.
“Summit received those alerts, but no one at the firm reviewed them,” Finra said in its statement on the censure.
In one example, CJ placed 533 trades for a retired customer over a three-year period, causing her to pay more than $171,000 in commissions, Finra uncovered.
Summit agreed to pay restitution to affected customers for at least $558,000--the commissions customers paid as a result of the excessive trading in their accounts.