A regulatory agency has ordered an Atlanta brokerage and investment banking firm to pay $707,559 in restitution to customers whose mutual fund accounts were targeted for excessive “switching” and who were unwittingly exposed to risky investments.
The restitution order by the Financial Industry Regulatory Authority, or FINRA, was the second in two months involving J.P. Turner & Co. In a separate case in November, the U.S. Securities and Exchange Commission reached a settlement with three of the company’s former brokers over excessive trades to generate commissions and fees.
In both cases, neither J.P. Turner nor the former brokers admitted any wrongdoing.
“We have significantly changed and enhanced our policies and procedures related to mutual fund activities,” company spokeswoman Heidi Wheatley told The Atlanta Journal-Constitution on Thursday. She said the agreement with FINRA, the largest independent regulator of U.S. securities firms, covered a period from 2008 to 2010.
J.P. Turner agreed to pay the $707,559 to 84 customers. Some of the customers’ investments were repeatedly switched from one fund to another, even though funds typically are designed for long-term investing and are not suited to short-term trading because of the fees and commissions that can accumulate. Wheatley said the broker involved in the switching was fired.
FINRA also said customers, some of whom were retirees, were sold risky leveraged and “inverse exchange-traded funds,” or ETFs, that can suffer significant losses in volatile markets despite the clients’ tolerance for less risk. Wheatley said the company no longer offers such funds.
Last month, three former J.P. Turner brokers were ordered to pay more than $800,000 in restitution after the SEC accused them of excessive trading in clients’ accounts to generate commissions and fees.
The “churning,” as the illegal practice is called, allegedly occurred between January 2008 and December 2009. While the actions were in the same period covered by the FINRA case, the J.P. Turner spokeswoman said the cases were separate.
The SEC said Ralph Calabro, Jason Konner and Dimitrios Koutsoubos, all three of whom were fired by the company, generated commissions, fees and margin interest totaling about $845,000.
The SEC did not say J.P. Turner had to pay restitution. The company, however, did agree to adopt more stringent procedures for supervising the actions of its brokers.
J.P. Turner has about 400 independent brokers across the country, and its Atlanta office, with about 100 employees, provides back-office support.
