Western International Securities Fined Over $1.5 Million for Failing to Detect Churning
From the desk of Jim Eccleston at 91视频下载链接
Western International Securities, a California broker-dealer, has been ordered to pay over $1.5 million for failing to detect churning in 100 customer accounts. The settlement, reached with the Financial Industry Regulatory Authority (FINRA), includes a $475,000 fine and nearly $1.06 million in restitution to eight customers who were charged excessive commissions due to unsuitable trading.
FINRA found four former Western advisors generated over $2.5 million in total trading costs between January 2016 and December 2019. These trading fees represented up to 30 percent of the accounts' equity value and had a turnover rate of eight, exceeding FINRA's benchmarks for potentially excessive trading.
According to AdvisorHub, until early 2019, Western relied on trade blotter-based surveillance that did not include cost-to-equity ratios, turnover rates, or other indicators of excessive trading. Additionally, Western failed to provide field supervisors with proper guidance on evaluating excessive trading and did not mandate reasonable follow-up actions.
Western’s compliance department used “negative consent” letters to inform customers about trading in their accounts, taking no action if customers did not respond. Later, Western required customers to sign attestations agreeing with their brokers’ trading activity but failed to explain the firm’s concerns.
The firm accepted the penalty, known as an Acceptance, Waiver, and Consent (“AWC”), without admitting or denying the charges.
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