The Financial Industry Regulatory Authority (FINRA) announced that Buckman, Buckman & Reid, a New Jersey-based brokerage firm, will pay about $205K in restitution to seven clients to settle claims that it did not reasonably supervise two ex-registered representatives accused of recommending “excessive and unsuitable trades.” The self-regulatory authority (SRO) has already barred both former brokers from the industry.
Also dealing with sanctions are Buckman Senior VP and owner Harry John Buckman, Jr., who supervised the two former brokers. Mr. Buckman was suspended for three months, ordered to pay a $20K fine, and must fulfill continuing education hours related to fulfilling supervisory duties.
FINRA said that the brokerage firm and Buckman neglected to identify when one of the ex-representatives was taking part in short-term Unit Investment Trust (UIT) trading on a frequent basis, as well as engaging in “other long-term investments” that charged customers substantial, upfront expenses. As a result, between ’13 to ’14 Buckman customers that were harmed ended up paying about $201K in commissions while sustaining approximately $163K in losses. Meantime, although there were red flags indicating “potentially excessive trading” by this former broker, the firm is accused of not reviewing these warnings.
The second ex-broker allegedly engaged in excessive trading in the accounts of three customers, including the making of over 130 trades in one 89-year old retiree’s account. The SRO said that even though the activity in this customer’s account was regularly flagged as “potentially problematic,” reports showing these alerts also were not reviewed.
Buckman and his brokerage firm are accused of not “reasonably” overseeing this ex-registered representative’s recommendation that four customers buy concentrated positions in one speculative investment, including the recommendation that one investor with a net worth of under $200K invest all the holdings in her account in this security. While Buckman reportedly knew about the recommendations, neither he nor anyone at the firm did anything to make sure these investments were suitable for each investor.
By settling, Buckman and his brokerage firm are not denying or admitting to the charges against them. They are, however, consenting to the entry of the findings by FINRA. The broker-dealer must also reassess and make changes to its supervisory system and procedures.
Addressing the order against Buckman, FINRA Department of Enforcement EVP, Susan Schroeder, noted that the brokerage firm was not fined because of its current financial state and “limited resources.” The firm’s BrokerCheck record noted 20 disclosures, including 16 regulatory events.
Engaging in too much trading in a client’s account is typically done for the purposes of earning commissions and other money and is not in the customer’s best interests. Signs of possible excessive trading, according to the SEC can include:
- Frequent trades, including “in-and-out purchases and sales” that don’t seem to advance your investment goals nor are they in alignment with the degree of risk you can handle.
- Unauthorized trades that you never gave your broker permission to make.
- High or excessive fees that you were not anticipating or expecting.
At Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm), our broker fraud lawyers work with investors who have lost money because of excessive trading, unauthorized trading, and other illegal acts. We also handle inadequate supervision cases against brokerage firms that failed to properly supervise their broker, making it possible for investor fraud to take place.
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