A Georgia financial advisor, Wayne Thaler, has been barred from the brokerage industry for three months for charging inflated commissions on the sale of penny stocks.
The Financial Industry Regulatory Authority (FINRA) regulates brokerage firms, and limits how much they can charge clients for securities transactions. Generally, markups should be under 5%. Mr. Thaler, however, charged customers commissions above 15% for transactions involving penny stocks.
Sometimes, higher commissions make sense when a brokerage firm bears risk in filling a customer’s order, but these transactions—called riskless principal transactions—carried, as the name implies, no risk whatsoever.
In addition to suspending Mr. Thaler, FINRA also considered a monetary fine, but decided not to impose one because of Mr. Thaler’s poor financial condition.
One important question about this situation is not answered in FINRA’s settlement agreement with Mr. Thaler: how did his employer, Integrated Trading and Investments, fail to catch these excessive commissions?
Under FINRA rules, brokerage firms are required to take reasonable steps to supervise their financial advisors. Where was the supervision here? It seems that Integrated Trading’s computer systems should have flagged these transactions.
Perhaps a better question is what Integrated Trading was thinking when they hired Mr. Thaler in the first place. Looking at Mr. Thaler’s employment history, it appears that most of the firms that hire him are shady; FINRA shuttered several of them. For example:
Why would any self-respecting brokerage firm hire a financial advisor that had worked for seven different firms that had all been so terrible they were kicked out of the brokerage industry?
If Mr. Thaler’s misconduct harmed any other investors, Integrated Trading could face claims, not only for negligent supervision, but also for negligent hiring.
If you have questions about investment losses, the securities litigation attorneys at Investor Defense Law LLP may be able to help, and offer free initial consultations.
Investor Defense Law LLP is a law firm dedicated to helping investors in California, Georgia, and Washington State recover investment losses.
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