Five Firms are Fined by FINRA almost $1M over High Fees

In a September 7, 2011 article in InvestmentNews.com, Bruce Kelly writes that the Financial Industry Regulatory Authority Inc. (FINRA), living up to its warnings of this year, said today that it has fined several firms for overcharging for postage and handling.

The article states that in May, Finra chief executive Richard Ketchum warned an audience of brokerage executives at the self-regulator’s annual meeting in Washington that it was making inquires into firms' overcharging clients.  Finra said it fined five firms a total of $910,000 for overcharging clients on handling transactions.

Mr. Ketchum earlier said: “We are taking a close look at excess charges for routine services, which some firms appear to be treating as an additional de facto commission. You can expect to see some enforcement activity in this area with respect to particularly egregious examples.”

Finra announced that the five firms were “understating the amount of total commissions charged to customers in trade confirmations and on fee schedules by mischaracterizing a portion of the commission charges as fees for handling services.”

The firms allegedly were using the practice to gouge clients, Finra said. “With respect to each of these firms, the handling fees were designed to serve as a source of additional transaction-based remuneration for the firm and thus were far in excess of the cost of the handling-related service the firms provided.”

InvestmentNews.com sites the five firms and respective fines as: Pointe Capital Inc. of Boca Raton, Fla., fined $300,000; John Thomas Financial of New York, $275,000; First Midwest Securities Inc. of Bloomington Ill., $150,000; A&F Financial Securities Inc. of Syosset, N.Y., $125,000; and Salomon Whitney LLC of Babylon Village, N.Y., $60,000.

Kelly writes that after Mr. Ketchum made his comments, brokerage executives said postage and handling fees charged by broker-dealers ranged from $3 or $4 to as high as $75 per transaction. Desperate for profits since the market collapse, some firms have been inflating postage and handling fees since late 2008, they said.

Finra said that, Pointe Capital charged a handling fee as high as $95 per trade, along with a commission. John Thomas charged as high as $75 per trade, and First Midwest charged as high as $99. A&F charged as high as $65 per trade, while Salomon Whitney charged as high as $69.

In settling Finra’s action, the firms agreed to implement corrective action to remedy the handling-fee-related violations, Finra said. In reaching the settlements, the firms neither admitted no denied the charges but consented to the entry of the findings.

Securities Attorney, Lars Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you or a family member feel you have become a victim of stock/securities loss, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.