FINRA Issues Fine for Florida Brokerage
Recently, the Financial Industry Regulatory Authority (FINRA), cited a Boca Raton brokerage firm for overcharging its clients. The company, Summit Brokerage Services, Inc. was fined a total of $75,000 and was also ordered to pay an additional $83,757 in financial restitution to affected customers. In doing so, Summit Brokerage did not admit to, or deny, any wrongdoing.
The Allegations Against Summit Brokerage
According to the official Letter of Acceptance provided by FINRA, the company failed to apply discounts on sales charges for eligible customers. This is a direct violation of FINRA’s Notice to Members 04-26. That guidance, which was issued in 2004, reminded all broker-dealers of their duty to properly apply discounts on fees related to the sale of Unit Investment Trusts (UITs). A UIT is an exchange traded mutual fund that offers a set portfolio of stocks and bonds that lasts for a pre-selected period of time. UITs are created and sold by broker-dealers. Generally, when a client purchases a UIT, they are required to pay an upfront sales fee. Depending on how much a customer purchases, they may be entitled to some form of discount on this fee. This works much the same way as does buying any other good in a bulk quantity. Buying a large amount of something may allow you to receive a reduction in the average unit price. Broker-dealers have an affirmative duty to ensure that their clients receive full discounts. Fees can quickly eat away the value of a client’s investment account. It is imperative that clients are not overcharged by their own brokerage firms.
Understanding Fiduciary Duty
Broker-dealers have an obligation to ensure that discounts are applied correctly as part of their broader fiduciary duty to their clients. In simple terms, a fiduciary duty is a requirement to look out for the best interests of the client. In simple terms, a fiduciary duty is a requirement to look out for the best interests of the client.. It requires financial advisers and brokerage firms to represent their clients in good faith and with adequate skill. Some specific examples of fiduciary responsibilities that Florida broker-dealers have include:
- Only recommending investment opportunities that the adviser is fully informed about;
- Only recommending investments that are appropriate for the client;
- Always putting the client’s financial interests above the financial interests of the firm;
- Never misrepresenting a relevant material fact related to any investment; and
- Always ensuring that the client gives proper authorization before any investment is made.
Ultimately, a financial adviser’s breach of fiduciary duty can cause tremendous financial damage to affected clients. You may have been victimized by a brokerage firm which put its own interest in collecting more fees above your financial interest. Alternatively, you may have been victimized by a brokerage that lost your money due to their negligence. Regardless, immediate legal action must be taken.
Contact Our Office Today
At Carlson & Associates, P.A., our Miami investment fraud attorneys have extensive experience representing fraud victims before FINRA arbitration panels. If you were the victim of fraud in South Florida, please call our office today at 1-(305)-372-9700 to schedule a fully confidential review of your case. Let us use our skills and experience to help you recover full and fair compensation.