Ex-Broker Hit With Reg BI Fine, Suspension

From July 2020 through November 2021, Malico recommended to one of his retail clients at Network 1 a series of transactions that was excessive in light of that client's investment profile, placing his and Network 1's interests ahead of the interests of the client.

The Client

The client was a 63-year-old tax preparer with an annual income of approximately $100,000 and a liquid net worth of approximately $50,000.

Although the client's "average account balance during the relevant period was less than $30,000, Malico recommended that he make more than 350 trades in his account, which caused [the customer] to pay more than $54,000 in commissions and other trading costs."

Malico frequently recommended that the customer buy and then sell a security, only to repurchase the same security weeks or even days later, FINRA's order explains.

For example, between January and July 2021, Malico recommended that the customer buy and then sell shares of the same biotechnology company on six separate occasions.

"On four of those occasions, Malico recommended that [the customer] buy shares of the company only to sell them on the same day or the next day," FINRA said. "Such in-and-out trading caused [the customer] to lose more than $6,000, while generating more than $3,200 in commissions and trading costs to Malico and Network 1."

Collectively, the trades that Malico recommended in the customer's account "resulted in an annualized cost-to-equity ratio exceeding 158% — meaning that Customer A's account would have had to grow by more than 158% annually just to break even," the order states.

As a result, Malico's recommendations made it virtually impossible for the customer to realize a profit and, in fact, the customer lost more than $17,500 during the relevant period, FINRA said.