Finra expels brokerage for Reg BI violations

investmentnews.com:

Finra expelled Monmouth Capital Management from the financial industry Friday for repeatedly committing trading and disclosure misconduct in violation of Regulation Best Interest.

The Financial Regulatory Authority Inc. said that from Aug. 1, 2020, through Feb. 28 this year, six Monmouth registered representatives traded excessively in 110 customer accounts, 42 of which were churned, resulting in $3,953,492 in commissions and trading costs for customers, according to the letter of acceptance, waiver and consent.  

Each of the accounts suffered substantial losses and more than half of the accounts belonged to senior customers, Finra said.

The broker-dealer self-regulator said Point Pleasant Beach, New Jersey-based Monmouth failed to establish written supervisory procedures to stay in compliance with Finra trading rules.

In addition, Finra charged that from Nov. 9, 2020, through Feb. 28 of this year, Monmouth made false and misleading disclosures on its Client Relationship Summary, or Form CRS, about how it monitored accounts and how much it charged for trades.

Finra said the trading offenses and the Form CRS shortfalls violated Reg BI, the broker-dealer standard of care that has been in force since June 2020. The Securities and Exchange Commission promulgated Reg BI in order to raise the broker advice standard above the previous suitability rule.

Monmouth is the second firm Finra has tossed out of the financial industry for Reg BI missteps. The first was SW Financial earlier this year.

“Monmouth abdicated its responsibility to reasonably supervise its representatives’ trading, resulting in substantial harm to customers, including Gold Star families,” Christopher Kelly, Finra senior vice president and acting head of