网曝吃瓜stern International Securities Fined Over $1.5 Million for Failing to Detect Churning
From the desk of Jim Eccleston at 网曝吃瓜
网曝吃瓜stern 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 网曝吃瓜stern 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, 网曝吃瓜stern relied on trade blotter-based surveillance that did not include cost-to-equity ratios, turnover rates, or other indicators of excessive trading. Additionally, 网曝吃瓜stern failed to provide field supervisors with proper guidance on evaluating excessive trading and did not mandate reasonable follow-up actions.
网曝吃瓜stern’s compliance department used “negative consent” letters to inform customers about trading in their accounts, taking no action if customers did not respond. Later, 网曝吃瓜stern 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.
网曝吃瓜 LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
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