Henry Bones II of New York New York a stockbroker formerly registered with Worden Capital Management has been fined $5,000.00 and suspended from associating with any Financial Industry Regulatory Authority (FINRA) member in any principal capacity based upon findings that Bones failed to supervise a Worden Capital Management stockbroker who made unsuitable investment recommendations to a customer. Letter of Acceptance Waiver and Consent No. 2017056432604 (Aug. 10, 2021).
According to the AWC, between November of 2016 and December of 2018, Bones was associated with Worden Capital Management as a branch manager. His duties included supervising stockbrokers’ trading in customer accounts. The stockbrokers’ activities were supposed to be supervised daily so that Bones could detect possible unsuitable trading or excessive commissions.
A daily trade blotter used by Bones enabled him to learn the commission-over-assets ratios for those investor accounts containing high commissions. Calculations performed by Bones for a particular stockbroker identified that their commission-over-assets ratios exceeded 20 percent. The regulator indicated that three of that stockbroker’s customer accounts contained commission-over-assets ratios ranging from 71 percent to 135 percent.
According to the AWC, Bones also received monthly emails that alerted him to active trading since the firm’s active account report information was included in those emails. This allowed Bones to know which accounts had been most actively traded, and which accounts contained high cost-to-equity ratios and high turnover rates.
The AWC stated that in one case, four customer accounts were identified in a December 2016 report provided to Bones. Those accounts concerned the stockbroker who caused the high commission-over-assets ratios. Bones learned of the turnover rates and cost-to-equity ratios for the stockbroker’s customer accounts in a January 2017 report as well. Two of the customers who were identified in the January 2017 report were also identified in the December 2016 report. But there was no investigation by Bones to identify the possible problems relating to that stockbroker’s trades. Bones was under the impression that trades were appropriate because of the customers’ investment objectives and net worth.
FINRA indicated that from November of 2016 to December of 2018, excessive trades were made by the stockbroker under Bones’ watch. Nine customers were affected by the trades. They collectively paid commissions of $423,987.00 while experiencing $415,626.00 in losses.
FINRA found that Bones was aware of the possibly unsuitable and excessive trading by the stockbroker and yet failed to supervise them in a reasonable manner. Bones did not ask for the stockbroker to do anything other than reduce his commissions in the future. There were no trading limitations or disciplinary actions taken against this stockbroker. Bones violated FINRA Rules 2010 and 3110 for his failure to supervise.
Bones was registered with Worden Capital Management between November 4, 2016 and December 10, 2019. He has been registered with SW Financial since December 9, 2019. Bones has been associated with two different securities broker dealers which have been expelled by regulators for violation of federal securities laws or are otherwise defunct.
