Richard Foerster Reynolds, of Garden City, New York, a stockbroker registered with Worden Capital Management, has been fined $5,000.00 and suspended for three months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity because Reynolds engaged in excessive trading in a customer’s account during the time that he was associated with Worden Capital Management. Letter of Acceptance, Waiver, and Consent No. 2019060753509 (August 22, 2024).
FINRA Rule 2111 requires stockbrokers to recommend investments that are appropriate for the customer’s financial situation, needs, and risk tolerance. Stockbrokers have to make sure that each transaction or investment strategy is suitable for the specific customer. They also need to avoid making frequent trades in a customer’s account unless it’s appropriate for that customer’s profile.
The regulator stated that Reynolds traded excessively in one of his customer’s accounts between October 2019 and June 2020. The customer, a 62-year-old business owner with a medium risk tolerance, relied on Reynolds’ advice. Instead of recommending a trading strategy that fit the customer’s financial situation and goals, Reynolds reportedly suggested frequent buying and selling of securities, known as in-and-out trading. This type of trading led to 43 transactions in the customer’s account, which was more active than what was suitable for the customer’s profile. As a result, the account had a turnover rate of nine and a cost-to-equity ratio of about 20 percent, meaning the account had to gain 20 percent just to cover the commissions and other fees. The customer ended up paying $39,436.00 in trading costs, with $35,950.00 of that amount going to commissions.
FINRA found that Reynolds’ trading was not appropriate for the customer and put them in a position where they were unlikely to see any significant return on their investments. Reynolds violated FINRA Rules 2111 and 2010 by not ensuring the trades matched the customer’s risk tolerance and investment goals.
FINRA Public Disclosure shows that Reynolds has been identified in thirteen (13) customer initiated investment related disputes containing allegations of Reynolds’ conduct while associated with securities broker dealers. On May 10, 2018, a customer initiated investment related complaint involving Reynolds’ conduct was settled for $75,000.00 in damages based upon alleged excessive commissions, unsuitable recommendations, improper margin use, and churning of the customer’s account during the time that Reynolds was associated with Worden Capital Management.
On January 30, 2020, a customer initiated investment related complaint involving Reynolds’ conduct was settled to resolve allegations of unauthorized commissions. Reynolds was also the subject of a customer initiated investment related FINRA securities arbitration claim which settled for $14,500.00 in damages based upon alleged negligent supervision in connection with the recommendation and sale of equities at Worden Capital Management LLC. FINRA Arbitration No. 18-04439 (March 11, 2020).
On March 21, 2022, a customer filed an investment related arbitration claim involving Reynolds’ conduct in which the customer requested $376,966.61 in damages based upon alleged negligence, unsuitable recommendations, unauthorized trading, excessive commissions, and churning. FINRA Arbitration No. 22-00347. Reynolds was also the subject of a customer initiated investment related FINRA securities arbitration claim which was settled for $100,000.00 in damages based upon alleged breach of fiduciary duty, excessive commissions, unauthorized trading, fraud, and unsuitable recommendations in stocks and over-the-counter equities. FINRA Arbitration No. 21-02186.
Reynolds was associated with SW Financial in Melville, New York from April 5, 2021, to September 14, 2022. FINRA expelled SW Financial on May 12, 2023. Reynolds was associated with Worden Capital Management LLC in Garden City, New York from January 12, 2016, to April 12, 2021. FINRA expelled Worden Capital Management on July 25, 2022.
