Finra Hits High-Turnover Broker with Excessive Trading Sanction

This post is written on behalf of Girard Bengali, APC.

Finra Hits High-Turnover Broker with Excessive Trading Sanction

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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