Independent Financial Group LLC (IFG), based in San Diego, California, has been sanctioned by Financial Industry Regulatory Authority (FINRA) for failing to establish and enforce a supervisory system designed to detect and prevent excessive trading in customer accounts. These failures occurred between July 2020 and December 2022. Additionally, IFG did not fully or promptly respond to FINRA’s requests for information under Rule 8210. Letter of Acceptance, Waiver, and Consent (AWC) No. 2021069460001.
The case involved a stockbroker at IFG who excessively traded accounts for five customers, causing significant financial harm. Despite receiving multiple red flags, including internal alerts and reports, IFG failed to take appropriate action. The customers collectively paid over $2.2 million in trading costs and experienced realized losses of approximately $2.2 million.
The affected accounts included:
A 77-year-old retiree with a goal of capital preservation and moderate risk tolerance. The excessive trading resulted in a cost-to-equity ratio of 20.3%, leading to losses exceeding $550,000 and trading costs over $490,000.
An 88-year-old retiree’s trust, where the individual was diagnosed with Alzheimer’s disease. The trading caused a cost-to-equity ratio of 23.4%, resulting in losses of more than $560,000 and trading costs exceeding $650,000.
An engineer with an income-focused objective and moderate risk tolerance. The representative’s trading led to a cost-to-equity ratio of 20.3%, causing losses of over $145,000 and trading costs exceeding $185,000.
A 69-year-old retired police officer with a capital appreciation objective and moderate risk tolerance. The trading resulted in a cost-to-equity ratio of 13.7%, with losses surpassing $115,000 and trading costs totaling $110,000.
A dental practice with two accounts aimed at growth and capital appreciation. Excessive trading caused a cost-to-equity ratio of 27.1%, resulting in realized losses exceeding $825,000 and trading costs of approximately $788,000.
On September 23, 2024, FINRA imposed sanctions on IFG, including a $500,000 fine, a censure, and an undertaking requiring senior management to address the supervisory deficiencies. IFG consented to these findings without admitting or denying the allegations.
IFG remains a FINRA-associated firm headquartered in San Diego, California. It currently operates 380 branch offices and employs approximately 650 registered representatives.
