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FINRA Charges J.P. Turner & Company for Unfair Commissions

By Oguz Ozdemir

In early July, 2009, the Financial Industry Regulatory Authority (FINRA) fined Atlanta firm J.P. Turner & Company $250,000 for not having a regulated system in place with regards to commissions charge to customers by their brokers.

FINRA acts as a regulatory agent for financial organizations and securities companies and enforces established rules and regulations to maintain some semblance of order in following polices and procedures that the agency has in place.

One of these areas is determining how much commission is charged to customers for financial and investment transactions. According to FINRA Executive Vice President and Chief of Enforcement Susan Merrill, brokers must take a number of factors into consideration when determining the rate of commission rather than just base it on the whether it is "below a certain percentage of the total price of the transaction."

In order to protect customers and make sure that they are charged a fair and reasonable rate for their transactions, FINRA has a system in place that requires brokers to take seven factors into account when determining commission fees: what type of security it is; if it is easily available in the market; how much the security is going to cost the investor; the size of the investment; disclosing the information to the investor; the history of past commission costs at the firm; and the type of business the firm conducts.

J.P. Turner & Company allowed its brokers to determine commissions solely on whether the price of the security was above $25 or below. If it was below $25 the brokers were allowed to mark up their commission by 4.5 percent while they could only charge 3.5 percent if the transaction was more than $25.

FINRA found that J.P. Turner & Company only had their trading manager ensure that the brokers did not exceed these amounts. As a result of FINRA's findings, and as part of the settlement, the company must undergo a complete review of the firm's policies and procedures, systems and training as they stack up against FINRA's Fair Pricing Rule. This review must be conducted by an independent consultant at the expense of J.P. Turner & Company.

The unregulated commissions occurred over a period from January 2002 and March of 2005. It was found that J.P. Turner & Company did not have any written procedures in place, there was a lack of supervisory control and their were no guidelines in place to assist their brokers and registered representatives from establishing a fair and reasonable commission structure. Basically, the brokers and representatives were left on their own while the company either knew about the practices and ignored them or did not have a solid procedure in place for existing and new representatives.

If you have been the victim of securities fraud through excessive commissions, breach of fiduciary duty or any other form of misrepresentation, call Napoli Bern Ripka at 1-888-LAW-IN-NY for a free consultation. We have an expert team who have years of experience in securities arbitration.

Originally posted at InjuryBoard by Oguz Ozdemir

Full post as published by New York City Personal Injury Lawyer on September 01, 2009 (boomark / email).