According to FINRA, Osaic Services, Inc. (formerly SagePoint Financial, Inc.) was censured and fined $250,000 for failing to adequately supervise options trading and excessive trading in customer accounts.

The firm permitted unqualified Trade Desk employees who lacked sufficient knowledge and training with options to override automated supervisory alerts and trading restrictions. In one case, the firm allowed a representative to open options positions requiring margin in a 60-year-old customer's cash account. Despite alerts warning of uncovered options creating potential losses exceeding the account's cash, the Trade Desk overrode the alerts without assessing the underlying facts.

Some options transactions exposed this customer to potential losses exceeding $4.5 million, more than 22 times her $200,000 liquid net worth. The firm also failed to respond to red flags about the same representative excessively trading this customer's account and that of her 91-year-old mother, who was widowed, in ill health, and had a net worth of $500,000.

Despite flagging high losses, cost-to-equity ratios, commissions, and turnover rates in December 2018, March 2019, and July 2019, the firm continued allowing the representative to trade these accounts without restrictions. The customers paid over $60,000 in combined commissions and costs, incurring over $1.2 million in losses. One customer lost her entire account value.

After the mother's death, the firm also failed to freeze her account despite being notified, allowing approximately $10,000 in additional commissions to be charged posthumously.

This case underscores the importance of responsive supervision when red flags appear.