← Broker database 2024-06-24
Steve Allen Moise Suspended for Excessive Trading Violating Regulation Best Interest
According to FINRA, Steve Allen Moise was assessed a deferred fine of $5,000 and suspended from the securities industry for five months for willfully violating the Care Obligation of Regulation Best Interest by recommending excessive trading in a customer's account.
Regulation Best Interest requires broker-dealers to act in the best interest of retail customers when making recommendations. The Care Obligation specifically requires brokers to exercise reasonable diligence, care, and skill when making recommendations, including considering factors such as potential risks, rewards, and costs.
Moise recommended that a customer execute 199 trades over several months—an extraordinarily high level of activity. On several occasions, Moise recommended that the customer sell a security shortly after purchasing it, a pattern that generated substantial commissions and trading costs while serving no apparent investment purpose. The customer suffered realized losses and paid more than $52,000 in commissions and trading costs as a result of this excessive trading.
This pattern of frequent trading, particularly buying and selling the same securities in quick succession, is known as churning when done to generate commissions. Even in fee-based accounts, excessive trading can violate Regulation Best Interest if the trading is not in the customer's best interest and exposes the customer to unnecessary costs and risks.
The customer recognized the harm and pursued mediation. Moise's member firm settled with the customer through mediation, presumably compensating the customer for losses caused by the excessive trading. The settlement demonstrates the firm acknowledged the trading was problematic.
The finding that Moise willfully violated Regulation Best Interest is significant. "Willful" in securities law does not require intent to violate the law, but rather that the person intended to commit the act that constitutes the violation. The willful finding may have implications for Moise beyond this FINRA case.
For investors, this case illustrates the importance of monitoring trading activity in your accounts, particularly in commission-based accounts where the broker has a financial incentive to trade. Warning signs of excessive trading include: frequent trading that seems inconsistent with your investment objectives, buying and selling the same securities in short time periods, high levels of commissions and trading costs relative to your account size, and churning activity that generates losses even as your broker earns commissions.
If you notice these patterns, question your broker about the investment rationale for the trading activity. If the explanations don't make sense, consider filing a complaint with the firm and with FINRA. As this case shows, excessive trading can result in substantial losses to customers and serious consequences for brokers who prioritize commissions over customer interests.
The five-month suspension from July 1 through November 30, 2024, removes Moise from the industry for a significant period and sends a message about the seriousness of Regulation Best Interest violations.