FINRA Orders Worden Capital Management LLC to Pay More than $1.2 Million in Restitution to Customers Whose Accounts Were Excessively Traded
Firm Also Fined $350,000 for Failing to Reasonably Supervise Recommended Securities Transactions and Other Violations
WASHINGTON—FINRA announced today that it sanctioned Worden Capital Management LLC (WCM) more than $1.5 million, including approximately $1.2 million in restitution to customers whose accounts were excessively traded by the firm’s representatives, and a $350,000 fine for supervisory and other violations. As part of the settlement, WCM must also retain an independent consultant to conduct a comprehensive review of the relevant portions of the firm’s supervisory systems and procedures.
FINRA found that from January 2015 to October 2019, WCM and the firm’s owner and CEO, Jamie Worden, failed to establish and enforce a supervisory system reasonably designed to achieve compliance with FINRA’s rules relating to excessive trading. As a result, WCM’s registered representatives made unsuitable recommendations and excessively traded customers’ accounts, causing customers to incur more than $1.2 million in commissions. In one instance, a WCM customer whose account was traded for approximately one year had a cost-to-equity ratio (or breakeven point) of more than 100 percent and incurred realized losses of $118,490, inclusive of the $205,557 the customer paid in commissions. WCM did not take action to investigate or stop the trading in this customer’s account, and others like it, even though WCM received a monthly active account report that routinely flagged dozens of customer accounts indicative of excessive trading.
Jessica Hopper, Executive Vice President and Head of FINRA’s Department of Enforcement, said, “FINRA has an unwavering commitment to protect investors from excessive and unsuitable trading. Firms must ensure they establish systems and procedures reasonably designed to supervise representatives’ recommendations to their customers, and firms’ supervisory personnel must have in place the necessary tools and training to address red flags.”
FINRA also found that WCM and Worden interfered with customers’ requests to transfer their accounts to another member firm. In addition, as a result of supervisory failures, WCM failed to timely file amendments to registered representatives’ Form U4s and Form U5s to disclose the filing or resolution of customer arbitrations.
For Worden’s supervisory violation and his interference with customer account transfers, he agreed to a 15-day suspension in all capacities, a three-month supervisory suspension, a $15,000 fine and must complete 20 hours of continuing education.
In settling this matter, WCM and Worden neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
FINRA is a not-for-profit organization dedicated to investor protection and market integrity. It regulates one critical part of the securities industry—brokerage firms doing business with the public in the United States. FINRA, overseen by the SEC, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers a dispute resolution forum for investors and brokerage firms and their registered employees. For more information, visit www.finra.org.