Corey Andrew White of Westlake Village California a stockbroker formerly registered with Financial West Group has been fined $20,000.00 and barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any supervisory or principal capacity founded on findings that he failed to supervise his stockbrokers’ trading resulting in unsuitable alternative investment trading in Financial West Group customer accounts. Letter of Acceptance Waiver and Consent No. 2017054755209 (Mar. 19, 2021).
According to the AWC, White was required by Financial West Group to create, implement and enforce written supervisory procedures and supervision systems. His duties included monitoring stockbrokers’ trading through the use of daily exception reports, monthly exception reports and daily trade blotters. FINRA stated that White was required to confirm his review of the securities broker dealer’s Monthly Account Supervision (MAS) reports. White failed to oblige.
FINRA stated that there were no written supervisory procedures created by White to allow supervisors to detect excessive trading at Financial West Group. There were no procedures that determined when cost-to-equity ratios or turnover rates demonstrated excessive trading. There were no directives concerning when active trading should be reviewed. White also neglected to identify whether any supervisory personnel should get in touch with customers to confirm that stockbrokers were trading in line with their investment objectives and their risk tolerance.
The AWC revealed that White was also required under written supervisory procedures to undertake a review of exchange traded fund transactions that had been recommended by Financial West Group stockbrokers. There was no review conducted by White.
FINRA stated that stockbrokers’ trading was not monitored by White with a view towards identifying sales practice violations. MAS reports were not reviewed by White. He also failed to see that other supervisors reviewed MAS reports or took steps to identify and potentially prevent unsuitable or excessive trading.
According to the AWC, between January of 2013 and December of 2016, one red flag after another had been encountered by White which suggested that customers’ accounts had been excessively traded by stockbrokers. Among these red flags were MAS exception reports that identified that there were significant losses in accounts which contained high commissions and high turnover rates. Some of the accounts showed that the same securities were being bought and sold frequently over short periods. The red flags also included trades which failed to be consistent with customers’ objectives. White did not take any action after encountering these red flags.
FINRA also reported that transactions involving non-traditional exchange traded products (non-traditional ETPs) had not been supervised by White. In one case, White knew that a double leveraged non-traditional exchange traded product had been held in a customer’s account for longer than a trading session. He did nothing about it. That investment was held for more than 570 days resulting in a $32,000 loss for the customer’s account.
Financial West Group also mandated that White review stockbrokers’ options trades to ensure that recommendations were suitable for customers. In one case, a customer’s account contained 370 options transactions that were not monitored or authorized by White. FINRA asserted that the transactions failed to align with the customer’s risk tolerance and investment objectives. Most of the customer’s long-term calls expired resulting in losses for the customer.
FINRA determined that White failed to supervise in violation of FINRA Rules 2010, 2360, 3110 and National Association of Securities Dealers (NASD) Rules 3010.
Since August 21, 2017, White has been a stockbroker and investment advisor representative of Western International Securities Inc.