Are You Being Charged Improper Handling Fees? FINRA Cracks Down on Brokers

by Wall Street Fraud on September 22, 2011

Broker handling feesThe Financial Industry Regulatory Authority (FINRA) has announced that it has fined five broker-dealers for mischaracterizing a portion of the commission charges as fees for handling services in order to increase profits.

As such, the handling fees greatly exceeded the cost of the handling-related services the firms provided.

The cases resulted from a targeted review of improper fees charged by broker-dealers in which FINRA found that the firms were routinely charging customers for handling fees that far exceeded the actual cost of the direct handling-related services the firms incurred in processing securities transactions.

With respect to the investigation, Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, "Trade confirmations and fee schedules must clearly reflect commission charges, and firms cannot disguise commissions by improperly describing them as charges for ancillary services. FINRA will continue to look closely at any firms that engage in these practices."

In some cases, firms charged a handling fee of almost $100 per transaction and earned a substantial percentage of their revenue from these fees.

FINRA sanctioned the following firms:

  • Pointe Capital, Inc. (nka JHS Capital Advisors, Inc.), of Boca Raton, Florida, was fined $300,000. The firm charged customers a handling fee as high as $95 per trade in addition to a commission. (Additional violations included inadequate supervisory procedures.)
  • John Thomas Financial, of New York, NY, was fined $275,000. The firm charged its customers a handling fee as high as $75 per trade in addition to a commission. (Additional violations included effecting material changes in its business operations without prior approval from FINRA, and deficiencies in complaint reporting, supervisory controls and certifications, branch office supervision and recordkeeping.)
  • First Midwest Securities, Inc., of Bloomington, IL, was fined $150,000. The firm charged customers a handling fee as high as $99 per trade in addition to a commission. (Additional violations included unfair and unreasonable markups/markdowns and inadequate written supervisory procedures.)
  • A&F Financial Securities, Inc., of Syosset, NY, was fined $125,000. The firm charged its customers a handling fee of $65 per trade in addition to a commission. (Additional violations included inadequate supervisory system and procedures, and failure to comply with continuing education requirement.)
  • Salomon Whitney LLC, of Babylon Village, NY, was fined $60,000. The firm charged its customers a handling fee as high as $69 per trade in addition to a commission.

For tips on how to avoid being overcharged by your stockbroker, please see our previous post on the topic.

At Wall Street Fraud, we are dedicated to offering assistance to those who have been hurt by improper corporate or investment practices.

If you have been the victim of stock brokerage fraud, securities fraud, mutual fund fraud, stockbroker fraud, annuities fraud, or any other type of investment fraud, please contact us today for a free case evaluation. Our talented and aggressive legal and professional staff is eager to help you recover your losses.

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