Summit to pay Restitution to Customers for Excessive Trades
According to a press announcement on Tuesday, the Financial Industry Regulatory Authority (FINRA) announced that it has sanctioned Summit Brokerage Services, Inc. for supervisory failures.
The firm will reportedly be fined a total amount exceeding $880,000 for supervisory failures, including approximately $558,000 in restitution to customers whose accounts were excessively traded by a former registered representative of the firm.
FINRA alleged that between January 2012 and March 2017, Summit failed to review certain automated trade alerts for its registered representatives’ trading activity that would be used to identify excessive trading.
According to FINRA, one representative in particular, purportedly excessively traded securities in the accounts of 14 Summit customers.
The representative, identified as “CJ” allegedly placed 533 trades for a retired customer over a three-year period, causing her to pay more than $171,000 in commissions.
For the 14 customers whose accounts were excessively traded, CJ’s trading generated more than 150 alerts for potentially excessive trading.
Although Summit received those alerts, apparently no one at the firm allegedly reviewed them.
Summit agreed to pay restitution to affected customers in the amount of the commissions they were charged as a result of the excessive trading in their accounts. FINRA previously barred “CJ” in a separate disciplinary action.
Further, FINRA also found that from June 2015 through March 2018, Summit allegedly failed to reasonably supervise its representatives’ use of “consolidated reports,” documents provided to customers summarizing the customer’s financial holdings, including assets held away from the firm.
Summit did not allow registered representatives to send consolidated reports unless they used a template that the firm had reviewed and approved.
However, FINRA reportedly found that the firm did not have a reasonable system to track whether its representatives complied, and although approximately 100 Summit representatives sent their customers consolidated reports during this period, only eight received the required review and approval.
One consolidated report sent by a registered representative of the firm to a customer allegedly materially misstated the value of the customer’s investment.
In settling this matter, Summit neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
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The foregoing information, which is all publicly available on FINRA’s website, is being provided by The White Law Group.
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