Osaic Services, the broker-dealer arm of the Osaic wealth management firm, will pay $250,000 for improperly supervising its reps, including a broker who continued to trade securities in a customer’s account for six months after she died, Finra announced.

In the settlement with Finra last week, Osaic Services agreed to penalties for violations that happened when it was known as SagePoint Financial, a predecessor firm that employed more than 1,500 representatives from January 2009 to November 2023, according to Finra.

Osaic, headquartered in Scottsdale, Ariz., and with more than $700 billion in assets under administration, did not immediately respond to a request for comment.

Between June 2018 and August 2019, the firm failed to establish and maintain a supervisory system that would ensure compliance with the suitability requirements for excessive and unsuitable trading, and options trading, according to Finra.

“Osaic Services permitted registered representatives who lacked sufficient knowledge, training, and experience with respect to options trading to override automated supervisory alerts and trading restrictions,” the letter said. “Moreover, the firm permitted one of its registered representatives to open in the account of one customer options positions that required the use of margin, even though the customer did not have a margin account.”

Some of the transactions exposed the 60-year-old customer to the risk of losses greater than $4.5 million, more than 22 times her liquid net worth of $200,000, according to Finra. Even though her account contained just $137,000 in cash, the transactions were overridden as “covered spreads,” the letter said, and she lost more than $1.2 million and paid nearly $42,000 in commissions, the regulator said.

This customer’s 91-year-old mother, a customer of the same broker, had losses of nearly $46,000 on which she paid more than $18,000 in commissions and costs because of a high turnover rate, Finra said.

After the mother died in December 2018, “Osaic Services failed to reasonably investigate and act upon red flags” that the broker continued to make unauthorized trades until June 2019, Finra said.

Despite hearing of the death in February 2019, the brokerage failed to record the death in its system, freeze the customer’s account, follow up with the broker to ensure the preservation of the account, and alert a supervisor that the broker was continuing to trade in the account, Finra said.

In this period, the broker allegedly made 21 trades and generated almost $10,000 in commissions, Finra said.

 The broker was terminated in August 2019, according to Finra.