According to FINRA, Richard Foerster Reynolds (CRD #2162706), based in Melbourne, Florida, was assessed a deferred fine of $5,000, suspended from association with any FINRA member in all capacities for three months, and ordered to pay $35,950, plus interest, in deferred restitution to a customer. The suspension was in effect from September 3, 2024, through December 2, 2024.
Without admitting or denying the findings, Reynolds consented to the sanctions and to the entry of findings that he excessively and unsuitably traded the account of a senior customer. Reynolds recommended high-frequency in-and-out trading to the customer, who had a medium risk tolerance, even when the price of his recommended securities did not materially change. The customer relied on Reynolds' advice and routinely followed his recommendations. Reynolds' trading recommendations generated total trading costs of $39,436, including $35,950 in commissions.
Excessive trading, also known as churning, is one of the most harmful practices in the securities industry. It occurs when a broker recommends an unreasonable number of transactions in a customer's account, primarily to generate commissions rather than to benefit the customer. When a broker engages in high-frequency in-and-out trading where securities are bought and quickly sold without meaningful price changes, it becomes clear that the trading activity serves the broker's financial interests, not the customer's investment objectives.
The fact that the customer in this case was a senior investor with a medium risk tolerance makes Reynolds' conduct especially troubling. Senior investors often have limited time horizons to recover from investment losses, and a medium risk tolerance clearly does not contemplate the kind of aggressive, high-frequency trading that Reynolds recommended. FINRA has made the protection of senior investors a priority, recognizing their particular vulnerability to unsuitable investment strategies and financial exploitation.
Investors should be vigilant about monitoring their account statements for signs of excessive trading. Warning signs include frequent purchases and sales of the same or similar securities, high levels of commission charges relative to account value, and portfolio turnover that seems inconsistent with the investor's stated objectives. If an investor notices these patterns, they should question their broker and consider seeking a second opinion.
The restitution order in this case ensures that the customer will be made whole for the commissions generated by the excessive trading. This is an important aspect of FINRA's enforcement approach, which seeks not only to punish misconduct but also to provide meaningful relief to harmed investors.
