A firm settled FINRA allegations for charging excessive commissions on certain transactions in equity securities.

In a Letter of Acceptance, Waiver and Consent, FINRA found that, between June 2015 and April 2020, the firm charged commissions on 236 transactions that ranged from 5 percent to 66 percent of the transactions' principal values. FINRA found the commissions to be "unfair" based on FINRA Rule 2121 Supplementary Material .01 (or the "5% Policy"), which sets forth a markup limit of 5 percent or less.

The firm was found to be in violation of FINRA Rules 2121 ("Fair Prices and Commissions") and 2010 ("Standards of Commercial Honor and Principles of Trade"). To settle the charges, the firm agreed to (i) a censure, (ii) a $20,000 fine and (iii) restitution in the amount of $7,083.93 plus interest, or the total of the charged excessive commissions.


This enforcement action is light on the details, making it impossible to judge whether the firm was engaged in egregious misconduct or the transaction sizes were so small that commissions were more akin to ticket charges. If 236 transactions produced only $7,083 in excess commissions, then that is only about $30 a trade. Were the transactions very small? Were the customers sophisticated? Were the securities hard to obtain and did the firm have to go to extra lengths to obtain them? What kind of securities were they?

More details are required if firms are to understand the significance of such an enforcement action.

Primary Sources

  1. FINRA AWC: Dawson James Securities, Inc.

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