The Financial Industry Regulatory Authority (FINRA”) announced that it sanctioned Summit Brokerage Services Inc. (CRD#: 34643, Boca Raton, Florida). Evidently, Summit failed to supervise securities brokers’ investment recommendations to prevent excessive trading. The securities firm also failed to supervise securities brokers’ use of consolidated reports. Summit “accepted” that it violated FINRA rules upon executing a Letter of Acceptance, Waiver and Consent #: 2016052655301 on June 14, 2019, which FINRA accepted July 2, 2019. Accordingly, FINRA censured the brokerage firm, and required it to pay a $325,000 fine and $558,296.44 in restitution. Here’s more on the disciplinary action against Summit Brokerage Services.

FINRA: Summit Brokerage Services Failed To “Reasonably Supervise” Suitability


First of all, Summit Brokerage Services did not supervise suitability of securities brokers’ recommended trades specifically concerning excessive trading. Apparently, the securities firm was supposed to comply with FINRA Rule 3110. This rule required Summit to make a “supervisory system” and supervisory procedures (“WSPs”) for supervising its securities brokers and principals. Also, Summit was supposed to comply with FINRA Rule 2110. This meant the securities firm and its brokers had to have a “reasonable basis” in order to believe investment recommendations were suitable for Summit customers. FINRA indicated in the AWC that unsuitable recommendations sometimes involves excessive trading or trading which is inconsistent with a client’s “investment profile.”

Here, Summit Brokerage Services fell short of supervising its securities brokers between 2012 and 2017. During that time, the firm did not use a supervisory system or WSPs that were reasonable, according to FINRA. Mainly, FINRA says that Summit’s principals did not review trade alerts to find out if the securities brokers made excessive trades. Particularly, Summit’s principals did not use alerts which provided information about abnormal turnover rates and cost-to-equity ratios. Instead, the principals manually reviewed a blotter for excessive trading, but that proved ineffective.

Summit Securities Broker Excessively Trades, Causes Clients $300,000 In Realized Losses

FINRA says that Summit Brokerage Services did not figure out that CJ (a Summit registered representative) excessively traded 14 clients’ accounts. The findings show that there were 150 trade alerts for CJ’s trading. Those trade alerts showed that the accounts CJ traded had possibly high turnover rates and cost-to-equity ratios. FINRA reported that CJ’s trading caused the clients to pay $651,405.23 in commissions.  However, CJ’s excessive trading caused the 14 clients’ to realize losses of more than $300,000.

Summit Broker Services Fails To Supervise Securities Brokers’ Use Of Consolidated Reports


FINRA also sanctioned Summit Brokerage Services for not making a supervisory system and WSPs from 2015 to 2018 concerning its overseeing of consolidated reports. It appears that Summit only reviewed about 8% of securities brokers’ consolidated reports before those brokers sent them to clients. Evidently, a Summit broker sent a client a report containing significant errors regarding the value of the client’s investments.

Experienced losses by investing with Summit Brokerage Services? If so, contact Soreide Law Group at (888) 760-6552 and speak with experienced counsel about a possible recovery of your investment losses. Soreide Law Group represents clients on a contingency fee basis and advances all costs. The firm has recovered millions of dollars for investors who have suffered losses due to misconduct of brokers and brokerage firms.

Lars Soreide Highest Ethical Standard Award 2018

Lars Soreide Highest Ethical Standard Award 2018