← Broker database 2024-07-29
Western International Securities Fined $475,000 for Excessive Trading Violations
According to FINRA, Western International Securities, Inc. was censured, fined $475,000, and ordered to pay $1,057,632.70 plus interest to customers on July 29, 2024, for failing to establish, maintain, and enforce a supervisory system reasonably designed to achieve compliance with the suitability requirements of FINRA Rule 2111 as they pertain to excessive trading.
The firm failed to reasonably respond to trading by representatives in customer accounts that appeared to be potentially excessive and unsuitable, causing those customers to pay total trading costs of more than $2.5 million. The amount of restitution the firm is required to pay has been reduced by sums that it previously paid to affected customers.
The firm was also required to certify that it has implemented and will maintain, for not less than one year, a reasonable plan of heightened supervision for the current registered representatives identified in the case. Additionally, the firm must certify that it has remediated the issues and implemented a reasonably designed supervisory system, including written supervisory procedures.
Excessive trading, also known as churning, 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's investment objectives. This practice violates FINRA's suitability rules and can devastate customer accounts through excessive fees and taxes. Investors should monitor their accounts for signs of excessive trading, including high turnover rates, frequent trading that seems inconsistent with their investment objectives, and trading costs that consume a significant portion of account value. This case demonstrates the importance of firms maintaining effective supervisory systems to detect and prevent excessive trading.