National investment loss lawyers KlaymanToskes reports the Financial Industry Regulatory Authority (“FINRA”) has ordered Western International Securities, whose parent company Atria Wealth is being purchased by LPL Financial, to pay over $1.5 million for failing to detect churning in 100 customer accounts. The total penalty includes a $475,000 fine and just under $1.06 million in restitution to eight customers who were charged excessive commissions due to the churning of their accounts.
According to its settlement with FINRA, Western International Securities failed to establish, maintain, and enforce a supervisory system, including written supervisory procedures (WSPs), reasonably designed to achieve compliance with the suitability requirements of FINRA Rule 2111 as they pertain to excessive trading. Excessive Trading occurs when a financial advisor engages in a high number of trades in a customer’s account, not for the customer’s benefit but to instead generate high commissions for the broker/firm. This excessive trading is also known as “Churning”.
KlaymanToskes continues to investigate Western International Securities and has launched an investigation into the brokerage firm’s California branches, following recent allegations of broker/advisor misconduct related to excessive trading, the sale of alternative investments such as GWG L Bonds, and failure to supervise.
KlaymanToskes is currently investigating the following Western International branches:
If you suffered investment losses at Western International Securities, and/or have concerns regarding your investment portfolio, contact KlaymanToskes at 888-997-9956 or by email at investigations@klaymantoskes.com for a free and confidential consultation to discuss your recovery options.
FINRA’s investigation revealed that four former Western International brokers generated over $2.5 million in total trading costs between January 2016 and December 2019. The fees incurred on the accounts represented as much as 30% of their equity value and had a turnover rate of eight, exceeding FINRA’s thresholds for potentially excessive trading.
In one particularly egregious case, a former Western broker switched a senior customer’s account from fee-based to brokerage and accrued $750,000 in commissions between 2018 and 2019, representing 28% of the account’s value. Another broker placed 3,200 trades in six customer accounts during the same period, leading to cost-to-equity ratios of 55%.
Until early 2019, Western’s systems reportedly relied on trade blotter-based surveillance that did not incorporate cost-to-equity ratios, turnover rates, or other useful indicators of excessive trading. Additionally, Western allegedly failed to provide field supervisors with the necessary guidance for evaluating potentially excessive trading and did not require them to take reasonable steps to respond, such as documenting justifications for excessive trades, following up with customers, or imposing heightened supervision on brokers.
Western International Securities has a long and troubled regulatory history, marked by numerous settlements and fines for failing to uphold industry standards and protect their clients’ best interests. Over the years, the firm has repeatedly found itself at the center of regulatory scrutiny due to its inadequate supervisory systems and failure to prevent misconduct by its brokers.
One of the most notable incidents involved Dawn Bennett, a top advisor at Western International, who was implicated in a $20 million Ponzi scheme. Bennett’s fraudulent activities not only tarnished the firm’s reputation but also highlighted significant lapses in Western’s oversight mechanisms. Despite the severity of the case, the firm’s response to the regulatory findings was insufficient, leading to further penalties and settlements.
Between 2019 and 2022, Western International faced multiple settlements with the Financial Industry Regulatory Authority (FINRA) for various supervisory failures. In 2020, the firm agreed to pay a $325,000 fine related to the Bennett case. In November of the same year, Western settled another significant case with FINRA, agreeing to pay $871,000 for failing to detect a broker’s unsuitable sales of certain real estate investment trusts (REITs).
In June 2022, the Securities and Exchange Commission charged Western International Securities and five of its California-registered financial advisors (Case No. 2:22-cv-04119) with violations related to the sale of alternative investments such as GWG L Bonds.
Current and former customers of Western International Securities who suffered investment losses are encouraged to contact attorney Steven D. Toskes at (888) 997-9956 or by email at investigations@klaymantoskes.com in furtherance of our investigation.
About KlaymanToskes
KlaymanToskes is a leading national securities law firm which practices exclusively in the field of securities arbitration and litigation on behalf of retail and institutional investors throughout the world in large and complex securities matters. The firm has recovered over $250 million in FINRA arbitrations and over $350 million in other securities litigation matters. KlaymanToskes has office locations in California, Florida, New York, and Puerto Rico.
Steven D. Toskes
KlaymanToskes, P.A.
Lawrence L. Klayman, Esq.
888-997-9956
investigations@klaymantoskes.com
www.klaymantoskes.com