According to FINRA, Robert Spencer Gerstein was assessed a deferred fine of $5,000, suspended from association with any FINRA member in all capacities for six months, and ordered to pay $129,496 plus interest in deferred restitution to customers for engaging in unsuitable short-term trading in securities intended to be held long-term.

Gerstein recommended and effected unsuitable short-term trades in Class A mutual fund shares in customer accounts, with an average holding period of 198 days. He also recommended short-term trading of other products that his firm considered should be held long-term, including Unit Investment Trusts (UITs) and Market Linked Investments (MLIs). Gerstein did not have a reasonable basis to believe that the recommended transactions, for which he received total compensation of $129,496, were suitable for the customer accounts.

Gerstein also caused his firm to maintain inaccurate books and records by marking as "unsolicited" order tickets for sale transactions in customer accounts when, in fact, he had solicited each transaction. This false marking was likely intended to avoid supervisory scrutiny of the unsuitable trading pattern.

This case demonstrates the harm caused by short-term trading in long-term investments. Class A mutual fund shares typically carry front-end sales charges, making them unsuitable for short-term trading. When representatives engage in such trading, they generate commissions while causing customers to incur unnecessary charges and potentially miss out on long-term investment returns.