FINRA Fines IFP Securities $100,000 Over Supervision Failure | LeapRate | Online Trading Industry News, Broker Intelligence & Fintech Analysis
US broker-dealer IFP Securities has been censured and fined $100,000 by the Financial Industry Regulatory Authority after the regulator found the Florida-based firm failed to adequately supervise thousands of mutual fund and unit investment trust transactions over a three-year period.
According to a Letter of Acceptance, Waiver and Consent published by FINRA, the firm’s automated surveillance system stopped generating alerts following a vendor change in November 2022.
This reportedly left IFP without any mechanism to flag potentially unsuitable mutual fund switching or short-term trading in unit investment trusts.
The system is said to have remained non-functional until 2025, during which time the firm had no alternative supervisory process in place.
FINRA found that IFP violated Regulation Best Interest, which requires broker-dealers to act in the best interest of retail customers when making investment recommendations, as well as FINRA Rules 3110 and 2010, which govern supervision and standards of commercial conduct, respectively.
The regulator’s concern reportedly centred on the risks posed by short-term trading of Class A mutual fund shares and early redemption of unit investment trusts, both of which carry upfront charges that customers may not recoup if positions are sold too quickly.
Mutual fund switching, which is selling one fund and reinvesting the proceeds in another, can similarly result in unnecessary costs for clients.
IFP Securities, which has approximately 290 registered representatives across around 140 branches, neither admitted nor denied the findings as part of the settlement.
