Reviewing Your Investment Brokerage Activity

• Watch for Red Flags
  • Unauthorized trades – Investors still have executive control over brokerage activity. Make sure to grant prior approval for all deals.
  • Frequent trading – Be wary of frequent trades and sales that don’t fit with your investment plan.
  • Excessive fees – Don’t be afraid to inquire about any irregular or excessive fees you receive on your statement. It is important to know
• Be Aware of Illegal Brokerage Activity
  • Churning – Churning is a term given to excessive broker-dealer trading. This occurs in order for broker-dealers to earn higher commissions. It is important to know that even excessive brokerage activity resulting in higher returns can still be considered churning.

Stopping Excessive Brokerage Activity

• Discuss Investment Goals – Discuss your investment goals with your broker-dealer. Make them aware of your expectations and needs.
• Discuss Activity with Brokerage Firm – If you are notified of excessive activity by your brokerage firm, discuss the investment plan that you made with your broker-dealer. Make sure you know if your broker’s actions are not in compliance with regulations.

Investor Resources

• Check your broker-dealer’s background by going to Investor.gov
• Submit a complaint to SEC or FINRA
• Contact Savage Villoch Law for questions on investment loss recovery

This week, the Securities and Exchange Commission (SEC) indicated that it would be calling on a need for more oversight from its financial regulation partner, the Financial Industry Regulatory Authority (FINRA). The decision to shift responsibility comes with an SEC initiative to devote more energies towards the rise of independent financial advisers. New business models offering greater independence and variety of investment services have led to an increase in the registration of investment advisers. Since this increase, the SEC has been criticized for lack of oversight, managing to examine only 10 percent of new investment adviser registrations per year. The SEC is increasing their investment adviser oversight an extra 20 percent to meet the growing number of independent advisement services. As the SEC’s new focus will take examiners away from the Wall Street sector, it says it will need FINRA to step up their efforts to brokerage oversight. While the SEC won’t be entirely removed from brokerage oversight, FINRA seems to be handling the shift well. On Tuesday, Reuters reported that FINRA had fined Bank of America’s Merrill Lynch $2.8 million for record-keeping and trade reporting violations. FINRA is an independent, financial regulatory organization. It is a privately-funded organization but it seems committed to it’s self-regulatory purpose. In regards to the Merrill Lynch fine, FINRA head of market regulation reiterated that accuracy of information reported by broker-dealers was critical for market integrity, according to the Reuters report. Regardless, the SEC wants to ensure that brokerage oversight will remain a priority. They will be keeping regulators focused on brokerage oversight in New York and Chicago, two of the largest brokerage sectors. They will also be overseeing FINRA’s efforts. Reuters reports that a group named FINRA and Securities Industry Oversight will monitor FINRA’s brokerage oversight examiners from offices in various major U.S. market sectors.