FINRA issued Monex Securities, Inc. (Monex or the Firm), a broker-dealer in Houston, Texas, a hefty fine for charging excessive markups on foreign bonds, generating additional income for the Firm while putting customers at risk.
Monex generates a large amount of its revenue from the sale of foreign bonds. Like any other investment, there are rules governing the sale of bonds. For instance, brokers must sell them at a “fair and reasonable” price in relation to current market trends.
However, from June 2012 to March 2013, Monex charged excessive mark-ups on foreign bond transactions, which resulted in almost $3,000 in unfair and unreasonable charges to customers. The markups ranged from 5.01% to 6.9% above the Firm’s current costs, which were not fair or reasonable given all relevant factors, including the individual prevailing market prices.
Although consumers clearly did not review current market prices before purchasing the bonds, Monex employees willfully violated FINRA rules by charging customers unreasonable prices. FINRA states that an agent cannot enter into a security transaction with a customer “at any price not reasonably related to the current market price of the security or to charge a commission which is not reasonable.”
As a result, the Firm’s accountholders were assessed $2,227.02 in excessive charges for the transactions. Monex reimbursed this amount to the affected customers. Further, the Firm paid FINRA a $7,500 fine for its indiscretions.
In the end, Monex took advantage of its customers by selling the foreign bonds at prices that were completely unfair. Because bonds are not traded frequently, the market for bonds can be murkier than, for example, selling stocks on the stock exchange, making it easier for representatives to sell bonds at higher rates without consumers noticing. Investors, however, do not have to fall prey to these excessive markups.
If you believe your broker overcharged you on your 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.