On June 17, FINRA announced it expelled a member firm and barred its two co-founders from association with any FINRA member for allegedly churning and excessively trading 20 customer accounts in violation of Regulation Best Interest (Reg BI) and federal securities anti-fraud provisions. According to the settlement order, the alleged misconduct occurred from February 2018 to October 2023 and caused customers to incur approximately $2 million in commissions and trading costs and approximately $2.7 million in losses.

FINRA found that the firm’s co-founders allegedly recommended a high-volume, high-cost market-timing strategy that made it virtually impossible for customers to earn a profit, with annualized cost-to-equity ratios as high as 111 percent and annualized turnover rates as high as 17.33. FINRA also found that the firm’s supervisors allegedly failed to identify and investigate red flags of excessive trading, including by not considering cost-to-equity ratios or turnover rates and not using available exception reports. The supervisors were each suspended for three months in all principal capacities, fined $5,000, and required to complete 20 hours of supervision-related continuing education. The respondents consented to the entry of FINRA’s findings without admitting or denying them.