Osaic Failed to Supervise Trading in Dead Client's Account: FINRA

By Melanie Waddell

News November 08, 2024 at 01:15 PM

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The Financial Industry Regulatory Authority has fined broker-dealer Osaic Services, formerly known as SagePoint Financial, $250,000 for failing to identify or reasonably respond to red flags of unsuitable margin use in two customer accounts.

From at least June 2018 to at least August 2019, Osaic Services failed to establish and maintain a supervisory system, including written supervisory procedures, reasonably designed to achieve compliance with the suitability requirements of FINRA rules as they pertain to excessive and unsuitable trading and options trading, the order states.

This included failing to, from at least February to June 2019, reasonably supervise unauthorized trading in the account of a customer after she died.

"Osaic Services permitted registered representatives who lacked sufficient knowledge, training, and experience with respect to options trading to override automated supervisory alerts and trading restrictions," the order states.

Moreover, in one account, the firm permitted one of its registered reps to open options positions that required the use of margin, even though the client did not have a margin account.

Some of those options transactions exposed the customer to a risk of loss exceeding $4.5 million — over 22 times her liquid net worth of $200,000, according to the order.

Further, Osaic Services failed to respond reasonably to indications that the broker was excessively or unsuitably trading customer accounts, including those of both clients as well as the one customer's mother.

"As a result, the two customers paid over $60,000 in commissions and costs, and incurred over $1.2 million in losses," the order states.

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