FINRA Fines Joseph Gunnar Over Lack of Policies Regarding Excessive Trading That It Calls a Violation of SEC Reg BI’s Care Obligation

Our Regulation Best Interest loss lawyers are investigating allegations against brokerage firm Joseph Gunnar & Co. following a $100,000 FINRA fine for supervisory failures related to excessive trading. The self-regulatory organization determined that the firm failed to establish reasonable policies to detect churning, violating the SEC Reg BI Care Obligation and leading to potential investor losses.

Our Regulation Best Interest Loss Lawyers Are Investigating

Shepherd Smith Edwards and Kantas (investorlawyers.com) represents investors who suffered losses because of broker misconduct or negligence. We are currently investigating allegations against Joseph Gunnar and Co. The Financial Industry Regulatory Authority (FINRA) ordered the brokerage firm to pay $100K after finding it did not have written procedures and policies regarding excessive trading. The self-regulatory organization (SRO) found this to be a violation of the Security and Exchange Commission Regulation Best Interest’s (SEC Reg BI’s) Care Obligation.

Why Did FINRA Fine Joseph Gunnar for Violating Reg Best Interest?

• FINRA said that between at least February 2023 and April 2024, the brokerage firm’s written policies and procedures were not reasonably designed in such a way as to comply with this SEC rule.
• The SRO said that Joseph Gunnar allegedly did not provide supervisors with guideposts or indicators to identify possible excessive trading.
• The brokerage firm’s purportedly inadequate supervisory measures kept it from detecting and dealing with red flags indicating excessive trading in three customer accounts.

What Is The SEC’s Reg BI Care Obligation and How Is It Supposed To Address Excessive Trading?

This particular obligation requires brokerage firms and their financial advisors to exercise reasonable “reasonable diligence, care, and skill” whenever recommending any securities, strategy, or transaction to a customer. Part of this involves ensuring that a  cumulative number of trades made in an account are not excessive.

What Is Excessive Trading and How Does This Lead to Investor Losses?

• Also referred to as churning, excessive trading is what happens when a financial advisor buys and sells securities in a customer’s account too often and in a manner that is unsuitable given the investor profile and risk tolerance level.
• Churning often benefits the financial advisor, who ends up earning commissions and fees for each transaction. If way too many of these trades are made, the charges could override any income a customer might earn from the investment.
• There is also what is known as the cost-equity ratio in an account. This is the total yearly costs occurred divided by the average account equity/balance. Excessive trading can up this ratio and impact how much in returns the account must make—not only to break even from costs, commission, and fees, but also before any actual net profit can generate.
• If an investor has a margin account, excessive trading can lead to margin interest and markups.
• Tax liabilities, such as short-term capital gains or realized tax drag from constantly cycling through investment positions, may occur.
• Long-term gains can be lost from jumping in and out of positions too often.

 Representing Investors Who Have Suffered Losses For Excessive Trading and Reg BI Violations

Shepherd Smith Edwards and Kantas can help you explore your legal options and assess whether churning, Reg BI violations, or some other bad broker behavior caused your investor losses.

Investors with claims against their financial advisor usually have to make their case in FINRA arbitration. You want to hire skilled securities attorneys who are also FINRA lawyers and that have experience winning investor claims in this forum.

 Discuss Your Excessive Trading Losses With Us Today

Call (800) 259-9010 or contact us online to schedule your free case consultation.