According to FINRA, Traderfield Securities, Inc. and its principal Mario Divita were sanctioned for failing to establish adequate supervisory systems to detect and prevent excessive trading, and for failing to reasonably supervise a registered representative who engaged in excessive trading that cost customers $451,057 in commissions and $538,057 in losses.

The firm was ordered to pay $300,000 in partial restitution to customers and must revise its supervisory procedures. Divita was fined $5,000, suspended from principal capacities for three months, and ordered to complete 24 hours of continuing education on supervisory responsibilities. FINRA imposed no additional fine against the firm after considering its revenues and financial resources.

The firm's written supervisory procedures tasked supervisors with monitoring for excessive trading through trade blotters, account statements, exception reports, and commission reports, but failed to explain how to identify excessive trading or how to respond when discovered. Making matters worse, supervisors did not actually review the exception reports as required by the procedures. The firm's procedures also failed to designate a supervisor for the representative engaged in the excessive trading, leaving no one monitoring his activities initially.

When Divita eventually began supervising the representative, he failed to take reasonable steps to detect the excessive trading. Despite knowing the representative's customers were responsible for large trading volumes at the firm, Divita never reviewed exception reports for potential excessive trading. Instead, he only reviewed daily trade reports and focused merely on volume rather than analyzing whether the trading patterns were suitable. Critically, Divita failed to monitor the significant losses piling up in customer accounts, did not view high commissions as a red flag, and did not understand or analyze key metrics like turnover rates and cost-to-equity ratios that would have revealed the excessive trading.

The firm also failed to report customer complaints to FINRA about the representative's trading activity, including complaints about excessive commissions, account losses, and alleged unauthorized trading.

This case demonstrates that supervisory procedures must do more than assign tasks—they must provide meaningful guidance on how to identify problems and what actions to take. Investors should review their account statements regularly and be alert to high commission charges relative to account value, frequent trading that seems inconsistent with their investment objectives, and supervisors who seem unfamiliar with basic suitability metrics.