Bad Brokers

According to FINRA, J.K. Financial Services, Inc. was censured, fined $65,000, and required to comply with certain undertakings for multiple violations including Form CRS deficiencies, email preservation failures, and inadequate outside business activity supervision.

The firm willfully violated S...

Read More

According to FINRA, J.K. Financial Services, Inc. was censured, fined $65,000, and required to comply with certain undertakings for multiple violations including Form CRS deficiencies, email preservation failures, and inadequate outside business activity supervision.

The firm willfully violated Securities Exchange Act requirements by omitting required information on its customer relationship summary (Form CRS). In June 2024, the firm filed a Form CRS that failed to disclose that it had disciplinary history, omitted required conversation starters regarding fees and costs and conflicts of interest, and contained other errors. A corrected Form CRS was not filed until April 2025.

Form CRS is a required disclosure document that helps retail investors understand the nature of their relationship with a broker-dealer, including fees, conflicts of interest, and disciplinary history. Failure to provide accurate Form CRS information deprives investors of critical information needed to make informed decisions.

The firm also failed to preserve and supervise email communications. From December 2021 to July 2022, due to technical problems with a third-party service provider, the firm was not capturing, archiving, and reviewing any email correspondence for 38 email addresses used for firm business. This resulted in approximately 1,100 lost emails. Additionally, some representatives used outside email addresses for securities business without the firm taking steps to review, retain, and preserve those communications.

The firm's written supervisory procedures were inadequate in multiple areas, failing to identify who was responsible for email archiving and review and providing no guidance on how reviews should be conducted, documented, or how samples should be selected.

Finally, the firm failed to reasonably supervise outside business activities and maintain records regarding customer investment profiles.

For investors, this case demonstrates that compliance failures often come in clusters. A firm with deficient procedures in one area may have problems in others as well.

Show Less

According to FINRA, Puente Servicios Financieros LLC was censured and fined $20,000 for failing to disclose required mark-up and mark-down information on retail customer confirmations.

FINRA Rule 2232 requires that retail customer confirmations for fixed-income transactions disclose the total dol...

Read More

According to FINRA, Puente Servicios Financieros LLC was censured and fined $20,000 for failing to disclose required mark-up and mark-down information on retail customer confirmations.

FINRA Rule 2232 requires that retail customer confirmations for fixed-income transactions disclose the total dollar amount and percentage of the prevailing market price for any mark-ups and mark-downs charged by the firm. This disclosure requirement helps investors understand the true cost of their transactions.

The firm's confirmations failed to include both the total dollar amount and percentage disclosures required under the rule. The disclosure failures stemmed from a coding issue in the firm's systems.

Compounding the problem, the firm had no supervisory system in place to catch these errors. Puente had no policies or procedures regarding supervisory reviews of disclosures on retail customer confirmations and did not conduct any reviews of retail customer confirmations to ensure they included the required mark-up and mark-down disclosures.

Mark-ups and mark-downs represent the difference between the price a dealer pays for a security and the price at which it sells that security to a customer. These charges are a significant component of transaction costs and can meaningfully impact investment returns, particularly for fixed-income investors who may engage in frequent trading.

For investors, this case underscores the importance of reviewing trade confirmations carefully. Confirmations should show you the mark-up or mark-down applied to your transaction. If this information is missing or unclear, you should contact your broker for clarification.

Understanding transaction costs is essential to evaluating investment performance. Even seemingly small mark-ups can compound over time and significantly reduce returns. Investors should compare costs across different brokers and consider whether the services provided justify the fees charged.

Show Less

According to FINRA, Vision Financial Markets LLC was censured and fined $250,000 for failing to accurately calculate and maintain customer reserve and proprietary accounts of broker-dealers (PAB) reserve requirements.

The firm's failures were significant. Vision inaccurately calculated its custom...

Read More

According to FINRA, Vision Financial Markets LLC was censured and fined $250,000 for failing to accurately calculate and maintain customer reserve and proprietary accounts of broker-dealers (PAB) reserve requirements.

The firm's failures were significant. Vision inaccurately calculated its customer reserve requirement, generally because it improperly included certain debits in its reserve formula. These inaccurate calculations caused the firm's reserve accounts to be underfunded, resulting in hindsight deficiencies generally ranging from $499,000 to $7.7 million.

The firm also improperly calculated its PAB reserve requirement, resulting in two hindsight deficiencies of $2.5 million and $4.1 million, respectively.

Customer reserve requirements under SEC Rule 15c3-3 are designed to protect customer assets held by broker-dealers. Firms must segregate customer funds and securities to ensure they remain available to customers even if the broker-dealer experiences financial difficulties. When firms fail to maintain adequate reserves, customer assets may be at risk.

The firm's violations extended to its books and records and regulatory filings. Vision created and maintained inaccurate records and filed FOCUS reports that inaccurately reflected its customer and PAB reserve obligations.

The firm's supervisory system was also deficient. Its written supervisory procedures failed to address the requirement that customer reserves be calculated based on settled positions and balances as of the close of the last business day of the week, did not explain how to perform accurate concentrated debit margin computations, and failed to describe how to correctly designate accounts for PAB reserve computation purposes. The firm also lacked any process to verify the accuracy of its weekly reserve computations.

Following FINRA's action, the firm updated its supervisory system and procedures regarding its reserve obligations.

For investors, this case highlights the importance of customer protection rules designed to safeguard your assets at a brokerage firm.

Show Less

According to FINRA, Avenue Securities LLC was censured and fined $100,000 for providing customers with fixed-income transaction confirmations containing inaccurate markup and mark-down information.

The scope of the problem was substantial, affecting approximately 44 percent of the firm's fixed-in...

Read More

According to FINRA, Avenue Securities LLC was censured and fined $100,000 for providing customers with fixed-income transaction confirmations containing inaccurate markup and mark-down information.

The scope of the problem was substantial, affecting approximately 44 percent of the firm's fixed-income customer confirmations during the relevant period. This means nearly half of all fixed-income trade confirmations sent to customers contained incorrect pricing information.

The firm's supervisory failures enabled this problem to persist. Avenue relied on a monthly review of a sample of customer confirmations, but prior to March 2024, its written supervisory procedures did not specifically require that fixed-income confirmations be included in the review sample. In practice, the firm rarely included them.

Even after the firm revised its procedures in March 2024 following FINRA inquiries, the limited sample review was not reasonably designed to identify inaccurate fixed-income confirmations. The firm did not fully remediate these issues until July 2025.

Perhaps most troubling, the firm failed to reasonably investigate after receiving calls from customers questioning the accuracy of the mark-up and mark-down amounts listed on their confirmations. Despite these customer complaints, the firm made no changes to how its order management system calculated and reported markup and mark-down amounts until October 2024.

This case illustrates several important lessons for investors. First, always review your trade confirmations carefully and question anything that seems incorrect. Second, if you raise concerns with your broker, expect them to investigate thoroughly. Third, firms that ignore customer complaints may have broader compliance problems.

Accurate confirmation statements are fundamental to investor protection. They allow investors to verify that trades were executed as intended and to understand the full cost of their transactions. When confirmations are inaccurate, investors cannot make informed decisions about their investments.

Show Less

According to FINRA, BofA Securities, Inc. was censured and fined $450,000 (of which $155,000 is payable to FINRA) for failing to prevent trade-throughs of protected quotations in National Market System stocks.

A trade-through occurs when a broker executes a trade at a price inferior to the best a...

Read More

According to FINRA, BofA Securities, Inc. was censured and fined $450,000 (of which $155,000 is payable to FINRA) for failing to prevent trade-throughs of protected quotations in National Market System stocks.

A trade-through occurs when a broker executes a trade at a price inferior to the best available price displayed on another exchange. Regulation NMS Rule 611 generally prohibits trade-throughs to ensure investors receive the best available prices.

BofA Securities had systemic issues that led to multiple violations. The firm had latency issues that prevented it from executing simultaneous off-exchange trades with intermarket sweep orders (ISOs). Instead, some trades were executed one second or more after ISOs were routed. These delays were unintended consequences of programming choices in two components of the firm's electronic order management systems.

Additionally, one of the firm's systems only processed the top eight levels of quotations for each stock from each exchange. If no protected quote appeared among those top eight levels (sometimes due to prevalent odd lots), the system would not route an ISO to that exchange, resulting in potential trade-throughs.

A firm trading desk also manually executed orders outside the National Best Bid or Offer (NBBO) for customer facilitations and position transfers during market hours, resulting in trade-throughs that did not qualify for any Rule 611 exception.

Furthermore, incorrect FIX tag information caused exchanges to reject ISOs, resulting in trade-throughs without necessary ISO routing.

The firm's supervisory system and written procedures were not reasonably designed to detect these various trade-through scenarios, and it did not conduct regular surveillance of its Rule 611 compliance program.

For investors, this case demonstrates that even large, sophisticated firms can have systemic issues affecting trade execution. Best execution obligations exist to protect investors, and regulatory enforcement helps ensure firms maintain compliant systems.

Show Less

According to FINRA, Independent Financial Group, LLC was censured and fined $100,000 for permitting a registered representative to continue associating with the firm during the period of his suspension when he was statutorily disqualified.

The violation arose when a registered representative was ...

Read More

According to FINRA, Independent Financial Group, LLC was censured and fined $100,000 for permitting a registered representative to continue associating with the firm during the period of his suspension when he was statutorily disqualified.

The violation arose when a registered representative was suspended by FINRA from associating with any FINRA member in all capacities. The AWC (Acceptance, Waiver and Consent) document instituting the suspension explicitly stated that the suspension would make the representative "subject to a statutory disqualification," meaning "he may not be associated with any FINRA member in any capacity, including clerical or ministerial functions, during the period of the suspension."

Despite this clear prohibition, Independent Financial Group permitted the representative to continue associating with the firm by entering securities orders through both the trading desk and electronic system of its clearing firm.

This is a serious violation. FINRA suspensions exist to protect investors by temporarily removing individuals who have engaged in misconduct from the securities industry. When firms permit suspended individuals to continue operating, they undermine this important investor protection mechanism.

Firms have an obligation to monitor the registration status of their associated persons and ensure that suspended or barred individuals do not engage in securities activities. This includes implementing controls to prevent suspended individuals from accessing trading systems.

For investors, this case underscores the importance of verifying the registration status of any individual who handles your securities transactions. You can check an individual's status, including any disciplinary history or current suspensions, through FINRA's BrokerCheck system at brokercheck.finra.org.

If you discover that a suspended individual has been handling your account, you should immediately contact the firm's compliance department and consider filing a complaint with FINRA.

Show Less

According to FINRA, CIBC World Markets Corp. was censured and fined $425,000 for failing to accurately report over-the-counter (OTC) options positions to the Large Options Positions Reporting (LOPR) system.

The firm's reporting failures stemmed from multiple technical and procedural issues. First...

Read More

According to FINRA, CIBC World Markets Corp. was censured and fined $425,000 for failing to accurately report over-the-counter (OTC) options positions to the Large Options Positions Reporting (LOPR) system.

The firm's reporting failures stemmed from multiple technical and procedural issues. First, the firm applied LOPR logic that overrode open position reports when reporting new options contracts identical to existing positions executed on prior trading days. This meant that when the firm reported a new contract identical to a previously reported position, only the quantity of the most recent trade was reflected, rather than the correct total aggregate quantity.

Second, the firm failed to enter Tax ID numbers when onboarding certain accounts. The firm's system prevented submission of LOPR records without all required fields, including Tax ID numbers. Reportable trades for accounts missing Tax ID numbers were quarantined in an internal queue for review, but due to human error, these quarantined trades were not reviewed or reported for almost two years.

Third, when the firm made certain amendments to its risk system, it inadvertently applied LOPR logic that caused certain reportable positions not to be reported.

The firm's supervisory system was also deficient. CIBC had no supervisory process for ensuring the accuracy and completeness of its LOPR reporting, and no process to ensure its internal queue of quarantined trades was reviewed. These deficiencies went undetected for more than six years.

The firm has since updated its written supervisory procedures to require daily oversight of quarantined trades, hired an employee to manage LOPR reporting processes, and implemented daily reconciliation of LOPR submissions with trading records.

Large options position reporting helps regulators monitor for potential market manipulation and systemic risk. Accurate reporting is essential to market integrity.

Show Less

According to FINRA, Interactive Brokers LLC was censured and fined $150,000 for violating Rule 603(c) of Regulation National Market System by failing to provide certain customers with required consolidated market data displays at the point of order entry.

The Vendor Display Rule requires broker-d...

Read More

According to FINRA, Interactive Brokers LLC was censured and fined $150,000 for violating Rule 603(c) of Regulation National Market System by failing to provide certain customers with required consolidated market data displays at the point of order entry.

The Vendor Display Rule requires broker-dealers to provide customers with a consolidated display of market data that includes all required elements at the point where they enter orders. This requirement ensures that investors have access to the information they need to make informed trading decisions.

Interactive Brokers displayed incomplete market data through its desktop, web-based, and mobile trading platforms to customers who did not pay for real-time market data through a subscription service or by purchasing on-demand static views. This meant that customers making trading decisions did not have access to complete market information.

The firm's supervisory failures were also significant. From December 2017 through May 2021, the firm had no supervisory system or written supervisory procedures and conducted no reviews of its order entry points for compliance with the Vendor Display Rule.

After implementing procedures in June 2021 requiring review of order entry points, the firm still failed to review all entry points across its trading platforms. Between June 2021 and December 2022, reviews did not cover all relevant areas. The firm ultimately identified 22 order entry points that had not been included in prior reviews and began comprehensive reviews in January 2023.

Following remediation, the firm now provides all customers with real-time consolidated displays for NMS stocks containing all required market data elements at the point of order entry.

For investors, this case highlights the importance of having access to complete market data when making trading decisions. Incomplete or delayed data can result in trades executed at suboptimal prices. Investors should ensure they understand what market data their broker provides and whether additional subscriptions are needed for comprehensive information.

Show Less

According to FINRA, Supreme Alliance LLC was censured and fined $80,000 for failing to establish and maintain adequate supervisory systems for variable annuity transactions and Regulation Best Interest compliance.

The firm's supervisory failures regarding deferred variable annuities were extensiv...

Read More

According to FINRA, Supreme Alliance LLC was censured and fined $80,000 for failing to establish and maintain adequate supervisory systems for variable annuity transactions and Regulation Best Interest compliance.

The firm's supervisory failures regarding deferred variable annuities were extensive. Supreme Alliance failed to establish systems or procedures reasonably designed to supervise whether registered representatives made reasonable efforts to obtain customer profile information needed to assess transaction suitability and whether transactions were in customers' best interests.

Specifically, the firm lacked procedures to ensure representatives obtained information about customers' risk tolerances and information about lost rider benefits before recommending variable annuity purchases or exchanges. The firm also did not have sufficient procedures to supervise whether customers were accurately informed about various features of recommended variable annuities.

The firm failed to document principal review and approval of multiple variable annuity applications. Between June 30, 2020, and April 25, 2022, the firm failed to establish policies and procedures reasonably designed to achieve Regulation Best Interest compliance.

From September 2019 to April 2022, the firm also failed to implement surveillance procedures to identify inappropriate variable annuity exchange rates. The firm maintained no policies explaining how it would monitor exchange rates, who was responsible for such surveillance, how often it would occur, what tools to use, or what parameters to consider.

Additionally, the firm failed to maintain adequate procedures for investigating the character and reputation of prospective registered representatives during the hiring process and failed to maintain records of those investigations.

Variable annuities are complex products with significant implications for investors' retirement security. Inadequate supervision of these products can result in investors purchasing unsuitable products or exchanging existing annuities inappropriately, potentially losing valuable benefits.

Investors considering variable annuities should carefully review all features, fees, and surrender charges before purchasing.

Show Less

According to FINRA, Mohammed A. Salim was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony requested by FINRA.

FINRA's investigation was initiated following a Uniform Termination Notice for Securities Industry Registration (Form U5...

Read More

According to FINRA, Mohammed A. Salim was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony requested by FINRA.

FINRA's investigation was initiated following a Uniform Termination Notice for Securities Industry Registration (Form U5) filed by Salim's member firm. The Form U5 disclosed that the firm had terminated Salim's registration due to concerns related to unauthorized sales and funds transfers from a customer's account to the representative's creditors.

These allegations are serious. Unauthorized sales occur when a broker executes transactions without proper customer authorization. Funds transfers from a customer's account to a representative's creditors would constitute conversion of customer assets, a particularly egregious form of misconduct.

While Salim initially cooperated with FINRA's investigation, he ultimately ceased doing so and refused to appear for testimony. Under FINRA rules, registered persons are required to cooperate with FINRA investigations, including providing testimony when requested. Refusal to testify results in an automatic bar from the securities industry.

The bar sanction exists because FINRA's ability to investigate potential misconduct and protect investors depends on obtaining information from those involved. When individuals refuse to cooperate, FINRA cannot fully investigate the allegations and must therefore remove the individual from the industry to protect investors.

For investors, this case serves as a reminder to monitor your accounts regularly and review all transaction confirmations and statements carefully. If you notice unauthorized activity in your account, report it immediately to your broker-dealer and consider filing a complaint with FINRA.

You can check the registration status and disciplinary history of any broker through FINRA's BrokerCheck system. Individuals who have been barred, like Salim, are prohibited from working in the securities industry.

Show Less