According to FINRA, E1 Asset Management, Inc. and its principal Ron Yehuda Itin were sanctioned for failing to reasonably supervise the fairness of mark-ups charged to retail customers on corporate bond transactions.

The case reveals a common compliance pitfall in the securities industry. While the firm had written supervisory procedures identifying factors relevant to reviewing mark-up reasonableness, in practice, Itin and the firm primarily checked whether mark-ups exceeded the five percent guideline without considering other critical factors. They failed to account for the type, availability, and price of securities being sold, or the firm's expenses in executing orders.

The result was that E1 Asset Management charged 3.75 percent mark-ups on widely available corporate bonds where the firm incurred minimal execution expenses. These mark-ups were not fair and reasonable under the circumstances, causing customers to pay $37,629.82 in excessive fees. Compounding the problem, the firm and Itin reviewed monthly TRACE reports comparing their mark-ups to those charged by other broker-dealers but took no investigative steps when discrepancies appeared.

This case highlights the importance of comprehensive supervision in securities firms. Having written procedures is not enough - firms must actually implement them in practice. For investors, this case demonstrates why it's important to understand the fees you're paying and to compare pricing across different brokers, especially when purchasing bonds. Fair pricing should reflect not just an arbitrary percentage, but the actual market conditions and effort involved in executing your trade.

The firm was ordered to pay full restitution plus interest to affected customers, while Itin received a one-month suspension from principal activities and must complete 20 hours of continuing education on supervisory responsibilities.