FINRA censured and fined Western International Securities $475,000 for supervisory failures related to unsuitable non-traded real estate investment trust (REIT) recommendations, including excessive trading in multiple customer accounts belonging to seniors.
According to the report, Western failed to establish, maintain, and enforce supervisory procedures related to suitability requirements pertaining to excessive trading.
FINRA found that as a result of inadequate supervision, Western failed to respond to potentially excessive and unsuitable trading in about 100 customer accounts, causing customers to incur excessive trading costs exceeding $2.5 million.
Specifically, Western International Securities failed to provide supervisors with tools to adequately identify potentially excessive trading, much less respond to unsuitable transactions. Even so, supervisors who did detect irregularities, per policy, were only required to notify compliance staff, which in turn were only required to send activity letters to customers, rather than take further investigative steps or potentially intervene upon the detection of red flags.
Furthermore, Western's activity letters to customers purportedly failed to notify them of the firm's concern about trading in their account—they were simply statements, without further notice explaining the potential red flags that led to the letter's generation in the first place.
In all, FINRA detected several instances of Western International Securities brokers and investment advisors trading excessively in customer accounts, causing one customer to pay more than $1.5 million in commissions and trading costs as a result.
This isn't Western International's first implication for unsuitable REIT recommendations. FINRA previously barred then-Western International broker Megurditch "Mike" Patatian for recommending $8 million of unsuitable American Realty Capital REITs to customers, including elderly and retired investors.
If you invested with Western International Securities or any broker, investment advisor, or firm whose excessive trading of REITs or other complex securities in your account have resulted in excessive trading costs, fees, or outright losses, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.