South Florida Arbitration & Litigation Lawyer Blog
Stock Broker Fraud, Breach of Fiduciary Duty, Misrepresentation and Negligent Supervision FINRA Arbitration and Litigation Lawyer Russell L. Forkey, Esq.
January, 2012:
AOS, Inc. dba TradingBlock (CRD #128605, Chicago, Illinois) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured, fined $15,000 and ordered to pay $41,593.23, plus interest, in restitution to affected customers. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it entered into a trading agreement with a foreign brokerdealer whose owner had his customers open fully disclosed accounts with the firm where the owner had discretionary trading authority, and negotiated a special compensation structure with the firm for option and equity transactions. The findings stated that approximately three months after the firm entered into the trading agreement with the owner, it terminated its relationship. The firm informed the customers that the owner would no longer be able to exercise discretion in their accounts, and the customers transferred their accounts to another firm. The findings also stated that the customers were not able to avail themselves of the full services they paid the firm upfront because their accounts were transferred to another firm before their positions expired. The findings also included that the firm’s service charges were greater than the amount warranted by market conditions, the cost of executing the transactions, the value of services the firm rendered and other pertinent factors; the total overcharges were $41,593.23.
FINRA found that the firm’s WSPs in effect at the time were inadequate because they stated that no special review was performed of commission activity in accounts with thirdparty authorization. By maintaining a written procedure that abdicated responsibility to review commission charges or in customer accounts where a third party had trading authority, the firm failed to ensure compliance with all applicable rules including NASD Rule 2440. (FINRA Case #2009016353501).