FINRA Accuses Florida Brokerage Firm of Failure to Establish and Maintain a Proper Supervisory System
On January 9th, 2018, the Financial Industry Regulatory Authority (FINRA) submitted a Letter of Acceptance, Waiver and Consent (“AWC”) regarding allegations of misconduct involving Spartan Securities Group, Ltd. (CRD#: 104478), a brokerage firm based in Clearwater, Florida. In this post, our Miami investment fraud lawyers highlight the alleged violations by Spartan Securities Group. To get the full details regarding this case please reference FINRA disciplinary proceeding number: 2015043667001.
The Allegations: Inadequate Supervisory System
The Violative Conduct
Under securities industry regulations, registered brokerage firms have a legal obligation to comply with Regulation NMS Rule 611(a). This is a very important rule that requires trading centers to implement a supervisory system that is reasonably designed to prevent illegitimate ‘trade-throughs’ on protected securities. Trade-throughs should only be permitted if the transaction in question falls into one of the permitted exceptions. According to the information provided by FINRA, Spartan Securities Group failed to establish such a system. FINRA officials report that the brokerage firm allowed at least 197 ‘trade-throughs’ of protected securities without ensuring that such trades relied on a valid exception.
What is a Trade-Through?
Many retail investors may not be familiar with the industry term ‘trade-through.’ Essentially, a ‘trade-through’ is a securities order that is completed at a price that is worse than the best possible price that is currently available on another exchange. Financial advisors and brokerage firms have a professional obligation to get their customers the best available price.
Rule 611 has been designed to help to ensure that this actually happens in practice. This rule requires brokers to compare the current stock quotes for securities that are listed on multiple different exchanges. If a brokerage firm can find a more advantageous price for their customer on another exchange, then the trade should go through that exchange, not on any exchange with a worse price. With limited exceptions, ‘trade-throughs’ should be avoided by brokerage firms.
Spartan Securities Group Consented to the Sanctions
In its published AWC, the Financial Industry Regulatory Authority reports that, without admitting to or denying any of the allegations, Spartan Securities Group has consented to the proposed sanctions offered by regulators. In relation to these allegations that the firm failed to establish and maintain an adequate supervisory system to prevent ‘trade-throughs,’ the Florida-based brokerage firm has agreed to the following three penalties:
- Censure;
- A $30,000 fine; and
- Commit to an undertaking to address the deficiencies with its procedures.
Contact Our Miami Securities Fraud Lawyers Today
At Carlson & Associates, P.A., our investment fraud attorneys are standing by, ready to fight for your legal rights. If you lost money because of your brokerage firm’s failure to establish a proper supervisory system, or failure to supervise its individual securities representatives, we can help.
Call us today for a confidential case evaluation. From our office in Miami, we represent investment fraud victims throughout South Florida, including in Fort Lauderdale, Hialeah, West Palm Beach, North Miami Beach, Homestead, and Hollywood.
Resources:
brokercheck.finra.org/firm/summary/104478
finra.org/sites/default/files/fda_documents/2015043667001%20Spartan%20Securities%20Group%2C%20Ltd.%20BD%20104478%20AWC%20jm.pdf
