Finra has shuttered a small Texas broker-dealer for allegedly charging clients excessive markups on $1.3 million in securities transactions.
The
Financial Industry Regulatory Authority Inc. on Aug. 26 expelled APS Financial Corp. of Austin, Texas, from the securities industry, saying that in 2005 and 2006, the firm's brokers conducted 59 transactions in which they failed to sell clients securities at a fair price, according to APS Financial's record on Finra's BrokerCheck system.
The firm also failed to have adequate supervisory systems and failed to reasonably and properly supervise its representatives, according to the Finra documents.
The majority of the 59 transactions in question involved a wealthy, elderly client of the firm, Finra said, with one markup of 67%. In total, six transactions had markups exceeding 10%, according to Finra.
APS joins the swelling ranks of securities firms that have been shut down in 2010, including Okoboji Financial Services Inc. and Provident Asset Management. Firms have exited for a variety of reasons, such as a shortage of capital and low trading volume, as many clients remain on the sidelines.
(Click here to see a list of more than a dozen B-Ds that have recently exited the business.)
While Finra has not reported how many firms it has expelled in 2010, the number of shuttered firms has been creeping up the past few years. According to statistics on Finra.org, 20 firms were expelled from the business in 2009, up from 19 a year earlier and 16 in 2007.
The matter with APS had been developing since April, when Finra gave the firm a Wells notice, meaning that the Finra staff had made a preliminary decision to take disciplinary action against the firm.
In a filing with the SEC last month, the firm's parent, America Physicians Service Group Inc., said it was seeking to sell the firm due to “weak financial performance of the financial services business in recent years.”
The firm agreed to be expelled from Finra membership without admitting or denying Finra's findings.
American Physicians Service Group is an insurance company with a focus on medical professional liability insurance. According to its annual report, APS Financial had a focus on high-yield corporate bonds, with analysts that provide proprietary research. The broker-dealer generated $7.3 million in commissions last year.
Kenneth Shifrin, chief executive of American Physicians Service Group, did not return calls seeking comment.
