J.P. Turner Fined $250,000 for Failing to Supervise Commissions Charged on
J.P. Turner Fined $250,000 for Failing to Supervise Commissions Charged on
Stock Trades
Washington, D.C. - The Financial Industry Regulatory Authority (FINRA)
announced today that it has imposed a $250,000 fine against J.P. Turner &
Company, LLC of Atlanta, GA, for failing to have an adequate supervisory
system designed to ensure that its registered representatives charged
customers fair and reasonable commissions on stock trades.
As part of the settlement, FINRA ordered J.P. Turner to retain, at its own
expense, an independent consultant to conduct a comprehensive review of the
adequacy of the firm’s policies, systems, procedures, and training relating
to FINRA’s Fair Pricing Rule.
“In order to establish a fair commission or mark-up, brokers must take into
consideration all of the relevant circumstances and not just whether the
commission is below a certain percentage of the total price of the
transaction,” said Susan Merrill, FINRA Executive Vice President and Chief
of Enforcement. “In this case, J.P. Turner allowed its brokers to charge
commissions of up to 4.5% on almost every stock trade without regard to the
circumstances, such as the size of the transaction, the cost of executing
the order, or whether the securities were readily available in the market.”
FINRA requires firms to implement a system and reasonable procedures to
ensure that customers are fairly charged for transactions, taking into
consideration all relevant factors. FINRA’s mark-up policy lists seven
factors for firms to consider: the type of security involved; the
availability of the security in the market; the price of the security; the
size of the transaction; disclosure to the customer; the pattern of the
firm’s mark-ups; and, the nature of the firm’s business.
FINRA found that between January 2002 and March 2005, J.P. Turner’s
supervisory system and written procedures failed to take these factors into
account and failed to provide adequate guidance to its registered
representatives to determine a fair commission or mark-up on equity
securities transactions.
FINRA found that under J.P. Turner’s system and procedures, representatives
had discretion to establish the commission on such transactions, limited
only by whether the price of the security was above or below $25 per share.
On all equity securities transactions in which the price of the security was
below $25, registered representatives were allowed to charge up to 4.5%,
while they could only charge up to 3.5% if the price of the security was
above $25. During the review period, 91% of the firm’s equity securities
transactions involved securities priced below $25 per share.
J.P. Turner’s trading manager was responsible for reviewing and approving
trades for fair and reasonable charges. Those reviews, however, were limited
to reviewing the transactions to ensure that the commissions charged did not
exceed the firm’s 3.5% and 4.5% guidelines.
In concluding this settlement, J.P. Turner neither admitted nor denied the
charges, but consented to the entry of FINRA’s findings.
Investors can obtain more information about, and the disciplinary record of,
any FINRA-registered broker or brokerage firm by using FINRA’s BrokerCheck.
FINRA makes BrokerCheck available at no charge. In 2007, members of the
public used this service to conduct 6.7 million reviews of broker or firm
records. Investors can access BrokerCheck at
<http://www.finra.org/brokercheck> www.finra.org/brokercheck or by calling
(800) 289-9999.
FINRA, the Financial Industry Regulatory Authority, is the largest
non-governmental regulator for all securities firms doing business in the
United States. FINRA is dedicated to investor protection and market
integrity through effective and efficient regulation and complementary
compliance and technology-based services. FINRA touches virtually every
aspect of the securities business-from registering and educating all
industry participants to examining securities firms; writing and enforcing
rules and the federal securities laws; informing and educating the investing
public; providing trade reporting and other industry utilities; and
administering the largest dispute resolution forum for investors and
registered firms. For more information, please visit our Web site at
<http://www.finra.org/index.htm> www.finra.org.
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