FINRA fined 5 broker-dealers which used deception to understate the amount of commission they actually were charging customers.  The firms did so by mischaracterizing a portion of the charges as handling fees.  The erroneous commission charges and fees were listed on customer trade confirmations and fee schedules.  The handling fees were designed to serve as a source of additional transaction based remuneration for the firm and thus were far in excess of the cost of the handling-related services the firms provided.

The cases resulted from a targeted sweep of handling fees broker-dealers charged their customers.  FINRA found that the firms were routinely charging customers for handling fees that far exceeded the actual cost of the direct handling-related services the firms incurred in processing securities transactions.  In some cases, firms charged a handling fee of almost $100 per transaction, which generated substantial revenue.

Monetary Sanctions by FINRA: 

• Pointe Capital, Inc. (nka JHS Capital Advisors, Inc.), of Boca Raton, FL, was fined $300K.  Customers were charged handling fees as high as $95 per trade in addition to a commission.  (Additional violations included inadequate supervisory procedures.)
• John Thomas Financial, of New York, NY, was fined $275K.  Its customers paid as much as $75 in handling fees per trade in addition to a commission.  (Additional violations included effecting material changes in its business operations without prior approval from FINRA, and deficiencies in complaint reporting, supervisory controls and certifications, branch office supervision and recordkeeping.)
• First Midwest Securities, Inc., of Bloomington, IL, was fined $150K.   Customers paid handling fees as high as $99 per trade in addition to a commission.  (Additional violations included unfair and unreasonable markups/markdowns and inadequate written supervisory procedures.)
• A&F Financial Securities, Inc., of Syosset, NY, was fined $125K.   Customers paid handling fees of $65 per trade in addition to a commission. (Additional violations included inadequate supervisory system and procedures, and failure to comply with continuing education requirement.)
• Salomon Whitney LLC, of Babylon Village, NY, was fined $60K.   Customers paid handling fees as high as $69 per trade in addition to a commission.

Non-Monetary Sanctions.   In addition to fines, each firm agreed to implement corrective action to remedy the handling fee-related violations.  This includes:

• they will fully and accurately disclose the specific service performed and the related fee on confirmations and any other communications with a customer where fees are discussed. 
• they will refer to all transaction-based remuneration as commissions or mark-ups (mark-downs) rather than as postage, handling or any other miscellaneous fee.
• they will revise their WSP's.
• they will provide training to their RRs and associated persons related to transaction-based remuneration, reasonable fees, their appropriate disclosure to customers and retention of related records.

To access the AWC's for each firm, go to:   [FINRA News Release, 9/7/11]