Finra Hits High-Turnover Broker with Excessive Trading Sanction

finra violations lawyer los angeles
June 30, 2020

The era of rogue brokers is not extinct.

Between July 2016 and November 2018, Frank Venturelli’s trading caused three customers to lose $373,226 while generating $169,803 in commissions for him and his now-defunct firm, First Standard Financial Co., the Financial Industry Regulatory Authority charged in a letter of acceptance, waiver and consent accepted by the broker.

Venturelli, who spent all but three months of his five-year career with Red Bank, New Jersey-based First Standard, was suspended for 11 months and ordered to repay the customers partial restitution of $30,000, according to the settlement that Finra finalized on Friday.

In a sign of the broker’s unreasonable activities, Finra contrasted the turnover rate and cost-to-equity ratios he generated in the three accounts with industry standards.

“A turnover rate of six, or a cost-to-equity ratio above 20 percent generally indicates that excessive trading has occurred,” Finra wrote. Venturelli’s turnover rates were 60.57, 30.29 and 40.06 in the three accounts, and the annualized cost-to-equity ratios were 146.53%, 88.18% and 105.89%.

“[I]t was virtually impossible for any of these customers to earn a profit,” Finra said.

In addition to the excessive trading, the trades were unsuitable for the customers’ investment profiles, the regulator  said.

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