← Broker database 2023-01-31
FINRA Suspends Todd Cirella 3 Months and Orders $27,566 Restitution for Excessive Trading
According to FINRA, Todd Anthony Cirella was fined $5,000, suspended from association with any FINRA member in all capacities for three months, and ordered to pay $27,566, plus interest, in restitution to customers for willfully violating the Best Interest Obligation under Regulation BI by recommending a series of trading in a senior customer's account that was excessive, unsuitable, and not in the customer's best interest.
The customer relied on Cirella's advice and routinely followed his recommendations and, as a result, Cirella exercised de facto control over the customer's account. Cirella's trading in the customer's account generated $27,566 in commissions and resulted in approximately $12,000 in trading losses, an annualized cost-to-equity ratio of 37.65 percent, and an annualized turnover rate of 20.39.
The suspension was in effect from February 21, 2023, through May 20, 2023.
This case involves excessive trading, also known as churning, which occurs when a broker engages in excessive buying and selling of securities in a customer's account primarily to generate commissions rather than to benefit the customer. The extraordinarily high cost-to-equity ratio of 37.65 percent means that the customer would have needed to earn returns of over 37 percent just to break even after paying commissions. This is far higher than reasonable market expectations.
The turnover rate of 20.39 means that the entire value of the account was turned over more than 20 times in a year, indicating an extremely aggressive trading strategy that was inconsistent with the customer's needs and best interest. The fact that the trading resulted in approximately $12,000 in losses while generating $27,566 in commissions demonstrates that the trading was designed to benefit Cirella through commissions rather than to benefit the customer.
Regulation BI (Best Interest) requires brokers to act in the best interest of retail customers when making recommendations. Excessive trading that generates high commissions while producing losses for customers is a clear violation of this obligation. The fact that the customer was a senior citizen who relied on Cirella's advice makes the violation particularly concerning, as senior investors are often more vulnerable to abusive practices.