FINRA Fines J.K. Financial for Regulation Best Interest (Reg BI) Violations
The Financial Industry Regulatory Authority (FINRA) recently announced sanctions against J.K. Financial, a California-based broker-dealer, for multiple compliance failures, including violations of Regulation Best Interest (Reg BI), inadequate email retention, and poor supervision of outside business activities.
According to FINRA’s findings, the firm was censured and fined $65,000 following a routine cycle examination that uncovered systemic supervisory and recordkeeping failures between August 2020 and May 2024.
J.K. Financial reportedly employs 26 registered representatives and offers equities, mutual funds, and variable annuities. The firm had previously been fined $10,000 by the U.S. Securities and Exchange Commission (SEC) in 2022 for issues with its Form CRS disclosure.
Deficiencies in Reg BI Compliance
FINRA’s most significant finding involved J.K. Financial’s failure to establish written policies and procedures reasonably designed to comply with the “care obligation” of Reg BI, which requires broker-dealers to act in their customers’ best interest when making investment recommendations.
According to the settlement, J.K. Financial’s new account forms failed to collect essential information such as investors’ risk tolerance, liquidity needs, and investment time horizons. For direct business mutual fund transactions, the firm often relied on third-party investment company forms that lacked basic customer profile data.
FINRA also noted that J.K. Financial had no formal process for representatives to document oral communications with clients or maintain required records of customer information. These deficiencies, FINRA said, prevented the firm from determining whether recommendations were in customers’ best interests.
Recordkeeping and Supervision Failures
FINRA also identified serious weaknesses in J.K. Financial’s email review and supervisory procedures:
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From August 2020 to May 2024, the firm’s written supervisory procedures (WSPs) did not specify who was responsible for email review, how often reviews should occur, or how samples should be selected.
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A technical failure between December 2021 and July 2022 caused approximately 1,100 business emails to go unarchived and unreviewed for 38 user accounts.
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The firm also permitted representatives to use outside email accounts for securities-related business without preserving or supervising those communications.
Additionally, J.K. Financial was cited for failing to properly supervise outside business activities (OBAs) of its registered representatives. From 2020 through 2024, the firm’s supervisory system did not require documentation showing that potential conflicts or interferences had been evaluated, as required under FINRA Rule 3270.01.
Form CRS Deficiencies
Despite a prior SEC penalty in 2022, J.K. Financial’s Form CRS—a disclosure document meant to help investors understand fees, conflicts, and disciplinary history—was again found to be incomplete between June 2024 and April 2025. The firm reportedly omitted required disclosures, including its disciplinary history and several “conversation starter” prompts intended to guide client discussions about costs and conflicts of interest.
FINRA’s Sanctions and Required Remediation
In addition to the $65,000 fine and censure, J.K. Financial must certify within 90 days that it has remediated all compliance deficiencies. This includes establishing written supervisory procedures and systems designed to achieve compliance with Reg BI, recordkeeping, and outside business activity rules going forward.
Recovering Investment Losses
If you invested with J.K. Financial or a J.K. Financial financial advisor and suffered investment losses, you may be able to recover your losses through FINRA arbitration. Broker-dealers are required to supervise their representatives and ensure that investment recommendations are suitable and in clients’ best interests.
The FINRA arbitration process allows investors to pursue claims for losses caused by negligent supervision, unsuitable recommendations, or failure to comply with regulatory obligations such as Reg BI.
The White Law Group’s Experience with FINRA Arbitration
The securities attorneys at The White Law Group have extensive experience representing investors in FINRA arbitration claims against brokerage firms across the country, including cases involving Reg BI violations, failure to supervise, and negligent compliance practices.
If you believe you have suffered losses investing with J.K. Financial, or another broker-dealer, the firm may be liable for damages on a contingency fee basis.
For a free consultation with a securities attorney, please call (888) 637-5510 or visit www.whitesecuritieslaw.com
Last modified: October 23, 2025