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Inconsistent Ticket Charges Leads to Broker-Dealer Fine
First Dallas Securities, a Dallas-based broker-dealer and FINRA member since 1989, agreed to pay a $87K in fines and restitution to settle FINRA charges that it improperly charged ticket charges in at least 449 transactions involving 129 accounts for clients of Hodges Capital Management, its affiliated RIA.
BACKGROUND. First Dallas conducts a general securities business and currently has approximately 24 registered reps (‘RRs’) and one branch office.
ACCORDING TO FINRA. Trades on behalf of HCM clients are placed through the firm’s trade processing platform, which incurs transaction and handling fees that are assessed by the firm’s clearing firm. Some or all of these fees are passed on by the firm to the RIA’s clients in the form of a ticket charge. Because the firm permits its RRs - who are all dually registered with the RIA - to determine the amount of the ticket charge (if any) that will be assessed to their clients, these charges are not uniform.
Indeed, the firm’s RRs utilized at least 12 different ticket charge structures in connection with trade processing, including varying flat fees, per-share fees and hybrid fees. These fees were disclosed in the customers’ advisory agreements with the RIA. For most of 2010 through 2014, the Firm improperly charged ticket charges in at least 449 transactions involving 129 accounts for HCM clients, with the total amount of overcharged ticket charges being $42,530 - which the firm voluntarily repaid to affected customers. These improper charges also were assessed in connection with the processing of block trades, which generally resulted in the assessment of a higher processing fee for brokerage transactions.
FINRA attributes the violative actions to the firm’s failure to properly supervise its RRs so that each customer was charged only the fee that was disclosed in those customer's respective advisory agreements.
This case was reported in FINRA Disciplinary Actions for May 2017.
For details on this case, go to ... FINRA Disciplinary Actions Online, and refer to Case #2014039095801.