Newbridge Securities Corp., a Boca Raton, Florida-based independent broker-dealer with 140 registered reps in 35 branch offices, on Friday agreed to pay a penalty of $105,000 for its lack of adequate supervision of advisors who recommended clients use margin over a five-year period, according to a settlement with the Financial Industry Regulatory Authority Inc.
“From July 2015 through June 2020, Newbridge failed to reasonably supervise recommendations for margin use by two representatives in five customer accounts,” Finra stated.
Trading with margin often increases risk for investors and also can increase commissions for financial advisors because trading volume may also go up.
Newbridge Securities accepted Finra’s findings without admitting or denying them. An attorney for the firm, Gregg Breitbart, did not return a call Monday to comment on the matter. Newbridge Securities was fined $60,000 and paid restitution of $45,000, plus interest.
Newbridge has a recent history of falling short on meeting industry standards for supervision of brokers and financial advisors.
“This is another speeding ticket of the firm by Finra, the cop, along with the other infractions of the firm’s history,” said Scott Silver, a plaintiff’s attorney.
Newbridge Securities in September agreed to a settlement with Finra to pay a penalty of $168,000 for its lack of compliance with anti-money laundering programs to oversee new clients linked to a 2019 small-cap IPO of a China-based company.
In September 2019, Finra fined Newbridge $225,000 among other violations, failing to establish, maintain and enforce a system, including written supervisory procedures, reasonably designed to supervise sales of complex securities, such as structured notes and non-traditional exchange-traded funds.
And in March 2023, Finra fined Newbridge $50,000, and required it to pay restitution of $114,000 to clients for similar supervisory issues, this time related to the sales of alternative mutual funds.
The most recent settlement focused on two reps whose clients were not sophisticated investors, according to Finra.
“From July 2015 through June 2020, Newbridge failed to reasonably supervise two registered representatives in one former branch office who recommended unsuitable margin use in five customer accounts,” Finra said. “The customers were not experienced or sophisticated investors and did not understand the extent to which margin was used in their accounts, or the costs associated with the margin use.”
“The recommended extensive use of margin in the customers’ accounts allowed the customers to purchase more securities than they could have if they had paid for the securities in full, which in turn led to more commissions for the representatives.”.
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