FINRA fined StateTrust Investments, Inc. and head trader Joseph Luis Turnes for charging unfair prices to customers in the firm's bond sales, failure to report transactions, making material misstatements of fact and failure to supervise.
FINRA Case #s: 2008013629601, 2010023001602
According to the findings, from 2007 through 2010, StateTrust and Turnes, who as head trader set the prices at which StateTrust buys and sells bond securities, charged excessive markups more than 8% above the prevailing market price to customers in violation of the Securities Act and FINRA rules. Investigators charged StateTrust with failure to supervise Turnes specifically, alleging that this failure to supervise resulted in the violative markup activity. Generally, a mark-up of more than 5% is considered excessive and unfair.
The investigation states that in 85 transactions FINRA investigated, markups/markdowns exceeded 8% or more from the prevailing market price while 536 total corporate bond transactions were associated with unfair prices charged to customers, totaling excess fees or charges of $336,472.03.
FINRA found that StateTrust failed to adequately supervise Turnes and failed to recognize Turnes' inappropriate pricing, even after the Trade Reporting Compliance Engine ("TRACE") rejected 64 transaction reports because they were executed outside the range of prices that other like bonds were sold or bought for. In the wake of this rejection, StateTrust allegedly failed to resubmit the transactions.
Finally, StateTrust allegedly provided customers with prospectus documents that contained a material misstatement of fact by falsely stating that no brokers that sold an affiliated mutual fund to customers were affiliated with the fund's investment manager, when in fact, StateTrust was and still is affiliated with the managers, resulting in significant revenue from sales charges and commissions.
If you have invested with StateTrust, Joseph Luis Turnes or with any firm or broker who you suspect has charged unfair prices, generated excessive fees, made material misstatements of fact or otherwise engaged in misconduct has has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.