The Financial Industry Regulatory Authority announced today that it has ordered New Jersey-based broker-dealer Buckman, Buckman & Reid Inc. (BBR) to pay approximately $205,000 in restitution to seven customers for failing to reasonably supervise two former registered reps who recommended excessive and unsuitable trades to multiple customers. The firm is headquartered in Little Silver, N.J., and has approximately 50 registered reps and two branch offices.
As part of regulators’ continued push to single out managers in enforcement proceedings as a deterrent, Finra also sanctioned Harry John (Chip) Buckman, Jr., a senior vice president and one of BBR's owners, for failing to supervise the two reps, both of whom reported directly to him.
Finra suspended Buckman from associating with any Finra member in any principal capacity for three months, assessed a $20,000 fine and required him to complete 40 hours of continuing education in supervisory responsibilities.
"A firm and its supervisors must be vigilant in identifying and responding to unsuitable activity such as excessive trading and unsuitable concentration of customer accounts, which can result in significant customer harm," said Susan Schroeder, Finra’s executive vice president and head of enforcement.
"In this matter, Finra has prioritized ensuring that affected customers receive full restitution, the firm fixes its supervisory flaws and the responsible supervisor is held accountable and receives additional training,” Schroeder said.
Given the firm's revenues and financial resources and its agreement to pay full restitution to affected customers, Finra did not impose a fine in addition to these other sanctions. “The firm's limited resources are better spent on remedial measures designed to prevent similar misconduct in the future,” Schroeder added.
As part of the settlement, Finra also required the firm to review and revise its supervisory system and written supervisory procedures. Finra previously barred both registered representatives from the industry.
Too Much Trading
Finra found that BBR and Buckman failed to identify that the two registered reps had engaged in frequent and short-term trading of unit investment trusts (UITs) and other long-term investments with significant up-front costs from 2013 until 2017.
For example, one rep recommended that a retired couple with an investment objective of "balance/conservative growth" buy and then promptly sell UITs and other long-term investments on 15 separate occasions in a 12-month period.