The Financial Industry Regulatory Authority has suspended and fined a former Network 1 Financial Securities broker with violating Regulation Best Interest for excessive trades in a 63-year-old client's account.
FINRA suspended Charles V. Malico for six months and ordered him to pay a $5,000 fine.
In a separate order, FINRA also ordered Network 1 to pay a $200,000 fine and $533,587 in restitution plus interest for the firm and its Chief Compliance Officer's failure to establish, maintain and enforce written supervisory procedures reasonably designed to achieve compliance with Reg BI.
According to FINRA's order, Malico first registered with FINRA in 1987.
From June 2016 through April 2022, Malico was registered with FINRA as a general securities representative through an association with Network 1 Financial Securities Inc.
Malico is not currently registered or associated with any FINRA member firm. However, he remains subject to FINRA's jurisdiction.
From July 2020 through November 2021, Malico "willfully violated" the best interest obligation under Rule 15l-1 of the Securities Exchange Act of 1934 and violated FINRA Rule 2010 by recommending a series of transactions in the account of one retail client that was excessive in light of the client's investment profile.
While no single test defines when trading is excessive, "factors such as the turnover rate, the cost-to-equity ratio, and the use of in-and-out trading in a customer's account are relevant to determining whether a member firm or associated person has excessively traded a customer's account in violation of Reg BI," FINRA explains.
The turnover rate represents the number of times that a portfolio of securities is exchanged for another portfolio of securities.