Securities Lawyers Blog
According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Peter Monson (Monson), currently associated with Van Clemens & Co. Incorporated (Van Clemens), has been subject to a regulatory investigation by FINRA. The focus of the regulatory investigation is for potential violations of NASD Conduct Rule 2510(b) – Authorization and Acceptance of Account, FINRA Rules 2111 – Suitability, and 2010 – Standards of Commercial Honor and Principles of Trade. This investigation appears to be related to a regulator action FINRA took against his firm Van Clemens concerning allegations of high frequency trading activity also referred to as churning or excessive trading.
FINRA alleged that Van Clemens, from June 1, 2015, through June 30, 2016, failed to establish and maintain a supervisory system reasonably designed to ensure that the firm reviewed transactions in customer accounts for potentially unsuitable excessive trading in order to achieve compliance with FINRA’s suitability rule. FINRA found that the firm’s procedures did not directly address quantitative suitability and, as such, did not set forth a process or identify personnel responsible for reviewing customer accounts for potentially excessive trading.
Accordingly, FINRA determined that Van Clemens did not instruct its supervisors to review account activity for potential excessive trading nor did it train its supervisors to do so. In addition, FINRA found that the firm lacked the necessary tools to even make a determination that excessive trading occurred such as reports for turnover rates or cost-to-equity ratios. FINRA found that a registered representative referred to by the initials “PM”, believed to be Monson, recommended transactions to a firm customer that resulted in the customer’s account having an annualized turnover rate above 9.0 and an annualized cost-equity ratio of 32.3%. FINRA found this activity was excessive, given the customer’s investment objectives and financial situation, and coincided with losses in the account of more than $100,000 during the 13-month period