← Broker database 2022-03-23
Arkady Ginsburg Suspended for Excessive and Unsuitable Trading in Customer Accounts
According to FINRA, Arkady Ginsburg was suspended for six months and ordered to pay $113,591 in partial restitution to customers on March 23, 2022, for engaging in excessive and unsuitable trading in customer accounts.
Ginsburg controlled the volume and frequency of trading in customer accounts and exercised de facto control because he recommended trades and customers routinely followed his recommendations. His trading generated high cost-to-equity ratios and turnover rates, along with significant losses and trading costs. Customers suffered market losses totaling $686,640.39, while Ginsburg earned $113,591 in commissions.
In light of Ginsburg's financial status, no monetary fine or prejudgment interest was imposed, but he was required to pay partial restitution equal to his commissions from the excessive trading.
Excessive trading, or churning, occurs when a broker trades a customer's account primarily to generate commissions rather than benefit the customer. High cost-to-equity ratios mean customers must achieve significant returns just to break even after paying transaction costs. High turnover rates indicate frequent buying and selling that serves the broker's financial interests more than the customer's investment goals.
The fact that customers suffered losses exceeding $686,000 while Ginsburg earned over $113,000 in commissions illustrates the harm caused by excessive trading. The trading activity generated substantial costs that eroded customer account values while enriching the broker.
De facto control exists when customers routinely follow their broker's recommendations without independent analysis. Even without formal discretionary authority, brokers who effectively control trading decisions through their recommendation practices are held accountable for excessive trading.
This case demonstrates that churning is one of the most harmful forms of broker misconduct because it prioritizes the broker's compensation over customer welfare. Investors should monitor their accounts for warning signs including frequent trading, high commission charges relative to account size, and declining balances despite overall market gains. Understanding cost-to-equity ratios and turnover rates can help identify excessive trading patterns.