IFS Securities, Inc. (“IFS Securities” or the “firm”) of Atlanta, Georgia was censured and fined for selling corporate bonds to its customers with unreasonable markups given market conditions.
The Atlanta broker-dealer earns a large portion of its revenue from buying and selling corporate bonds. Like any other investment, there are rules governing the sale of bonds. For instance, a registered broker can charge more than the prevailing market price of a bond in order to cover his expenses and time for managing the transaction; this is commonly referred to as a markup. However, brokers must sell bonds at a “fair and reasonable price” in relation to current market conditions.
As part of a routine review of the firm’s corporate bond transactions during the period July 1, 2012 through September 30, 2012 (the “review period”), FINRA detected that nine bond transactions were committed at unfair prices. The firm sold corporate bonds to customers at exaggerated prices, taking into consideration all relevant circumstances, including market conditions, the expenses involved, and that the firm was entitled to a profit.
IFS Securities paid a $5,000 fine for taking advantage of its customers by selling bonds at unreasonable prices. Because bonds are not traded as frequently as stocks, the market for corporate bonds can be murkier than the stock exchange, making it easier for representatives to sell bonds at higher rates without consumers noticing. However, customers do not have to fall prey to these excessive markups.
If you believe your broker overcharged you on your corporate bond trades, contact the attorneys at Investor Defense Law LLP at no charge and find out whether you have a valid claim.
Investor Defense Law LLP is a law firm dedicated to helping investors in California, Georgia, and Washington recover losses caused by stockbrokers, financial advisers, or investment firms. To learn more, contact an investment fraud attorney at 800.487.4660.