Spencer Edwards Inc. a securities broker dealer headquartered in Colorado has been fined $250,000.00 by Financial Industry Regulatory Authority (FINRA) based in part on findings that the firm overcharged customers on transactions that the firm’s stockbrokers effected in the customers’ accounts. Letter of Acceptance Waiver and Consent No. 2016051209102 (June 11, 2019).
According to the AWC, the supervisory procedures implemented by the firm at the time called for the firm’s commissions to be $75.00 at minimum, and for commissions to be capped at five percent. As a result, the firm was required to monitor the transactions placed by stockbrokers on a daily basis and to preserve the records pertaining to its daily reviews to make sure that commissions had not been charged to customers on an excessive basis. The AWC stated that in addition to the commissions, a ticket charge of up to $45.00 was assessed by the firm for stock transactions. Further, the firm assessed a block trading fee or settlement fee of up to 1.5 percent of the principal amount in each trade.
Despite these supervisory procedures being in force, between November of 2014 and August of 2015, there were at least 5,500 circumstances where customers were assessed more than five percent on stock transactions. Those 5,500 occasions apparently encompassed approximately sixty percent of the trading volume generated by the firm through the November 2014 to August 2015 timeframe. Apparently, some of the customers had been assessed charges that were equal to more than twenty percent of the principal amount involved in the stock transactions. FINRA revealed that in sum, more than $500,00.00 in excess charges were assessed by Spencer Edwards Inc.
The AWC stated that the firm’s charges were not fair or reasonable. Particularly, FINRA stated that the firm engaged in a pattern of imposing excessive charges. Also, FINRA noted that the firm already stood to make its minimum commissions; and there already existed a market for the shares involved in the transactions. Evidently, the firm neglected to abide by its own practices as evidenced by the charges violating the written supervisory procedures utilized by the firm. FINRA found the firm’s conduct in this respect to be violative of FINRA Rules 2010, 2121, and 3110(b) as well as National Association of Securities Dealers (NASD) Rule 3010(b).
