FINRA Fines Joseph Gunnar & Co. $100,000 for Reg BI Supervisory Failures

Joseph Gunnar & Co. LLC has agreed to pay a $100,000 fine as part of a settlement with the Financial Industry Regulatory Authority (FINRA), the regulator said. The firm also accepted a censure.

According to FINRA, between at least February 2023 and April 2024, Gunnar’s written policies and procedures were not reasonably designed to achieve compliance with Regulation Best Interest (Reg BI) as it relates to excessive trading. Although the firm used an “active account report” showing turnover rate and cost-to-equity ratio in certain accounts, it failed to give supervisors guideposts or indicators—such as benchmarks for high turnover rates and high cost-to-equity ratios—to identify potentially excessive trading.

The procedures also indicated that the active account report would be used to evaluate commission restrictions and when to send a customer a letter listing trading activity in the customer’s accounts. However, they did not explain when or under what circumstances the firm would impose commission restrictions or what steps it would take after sending a trading activity letter.

As a result of these supervisory failures, the firm did not detect and address red flags of excessive trading in three customer accounts during the relevant period. Each of these accounts appeared on the firm’s monthly active account reports, which reflected the accounts’ turnover rates and cost-to-equity ratios. Other than sending trading activity letters to the three customers, the firm took no further steps to address the trading in the three accounts until it restricted the charging of commissions in August 2024.

In April 2024, the firm updated its policies and procedures to include information about the active account report and the use of activity letters and commission restrictions.

By failing to establish, maintain, and enforce a reasonable supervisory system, including written policies and procedures, to achieve compliance with Reg BI’s Care Obligation as it relates to excessive trading, Gunnar violated Exchange Act Rule 15l-1(a)(1), FINRA Rule 3110, and FINRA Rule 2010, FINRA said.

Gunnar has been a member of FINRA since March 1990. It is a full-service brokerage firm headquartered in Uniondale, New York, with 43 registered representatives in two branch offices.