FINRA Fines for Unsuitable Trading

On Jul. 16, FINRA fined Capitol $100k for unsuitable fund advice.

  • Capitol Securities Management, fined $100k, with $44.7k restitution to clients.
  • For conducting unsuitable short-term trading, in unit investment trusts (UITs).

Unsuitable Trades

  • Failed to establish supervisory system to prevent unsuitable short-term trades.
  • Did not enforced UIT switch form per policy, to detect premature sales of UITs.
  • There was no surveillance or exception reports that detected unsuitable trades.
  • Brokers recommended and made short-term trades in their customer accounts.
  • Recommended customers use proceeds to buy UTI with same investment goal.
  • As result of trading, customers paid excess sales charges in amount of $44.7k.
  • Firm did not retain instant message of employees, managers, compliance staff.