FINRA Cracks Down on Excessive Trading

FINRA says there will be an Increase in Excessive Trading Cases in 2021

The Financial Industry Regulatory Authority (FINRA) is cracking down on excessive trading thanks to “greater enforcement flexibility provided by Regulation Best Interest,” according to an article in Financial Advisor IQ last week.

There has been an increase in excessive trading cases, according to Christopher Kelly, Finra’s deputy head of enforcement, at a Practising Law Institute conference on broker-dealer regulation, according to the article. 

Kelly reportedly said that there will be more cases through 2021 brought by FINRA for excessive trading, and also against firms for failing to supervise, according to the article.

Reg BI has been helpful in FINRA’s “efforts to pursue excessive trading charges,” according to the article.

Regulation Best Interest, a 2019 Securities and Exchange Commission (SEC) rule requires that a broker/dealer and its associated persons must always act in the best interest of their retail customers when recommending securities or investment strategies involving securities.

In the past,  for FINRA to prove excessive trading, the regulator had to prove the trading was excessive and unsuitable, and also that the broker controlled the trading.

With the Reg BI, this is no longer necessary. Further  in order to spot excessive trading, regulators look at the cost-to-equity ratio, which reflects the percentage of return on a customer’s average net equity that is needed to cover commissions and other trading expenses, according to the article. 

Excessive Trading Securities Attorneys 

The White Law Group continues to file FINRA arbitration cases on behalf of clients who have suffered losses as a result of churning or excessive trading.

Often churning or excessive trading occurs when a broker has discretionary authority of a client’s account, meaning they do not need the clients consent to trade on their behalf. Churning may result in significant losses and exposes the client to unnecessary tax liabilities.

If you believe you have been a victim of excessive trading, the securities attorneys at The White Law Group may be able to help you. For a free consultation, please contact The White Law Group at 888-637-5510.

The White Law Group is a national securities fraud, securities arbitration, investor protection and securities regulation/ compliance law firm with offices in Chicago, Illinois.

For more information on The White Law Group, please visit our website at https://whitesecuritieslaw.com.