A broker-dealer settled FINRA charges for failing to adequately supervise the suitability of registered representatives' trading activity, including the representatives' creation and use of consolidated reports for customers.
According to FINRA, Summit Brokerage Services, Inc. ("Summit") failed to establish and implement supervisory procedures relating to the suitability of registered representatives' trading, including failing to detect excessive trading by one representative that led to the representative's customers paying "hundreds of thousands of dollars in commissions." The excessive trading of securities in the affected customers' accounts generated more than 150 alerts, which FINRA claimed Summit failed to review or act upon. In addition, FINRA found that Summit failed to supervise its representatives' creation and use of consolidated reports.
To settle the charges of violations of FINRA Rules 3110 ("Supervision") and 2010 ("Standards of Commercial Honor and Principles of Trade"), Summit agreed to a censure, a $325,000 fine and payment of restitution to the affected customers in the amount of $558,296.44, plus interest.
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