Western International Securities Settles with FINRA, Agrees to $475,000 Fine

Western International Securities, Inc. has reached a settlement with the Financial Industry Regulatory Authority (FINRA), agreeing to pay a $475,000 fine for failing to maintain a supervisory system designed to ensure compliance with securities laws and FINRA regulations. The settlement addresses issues that occurred between January 2016 and June 2020, during which Western's supervisory procedures were found to be inadequate in preventing excessive trading.

According to the findings, Western's supervisory procedures (WSPs) were insufficiently designed to detect potentially excessive trading, including failures to review key indicators such as cost-to-equity ratios and turnover rates. The firm's WSPs lacked necessary guidance for evaluating these indicators and did not require supervisors to take appropriate actions when excessive trading was identified.

Additionally, Western's activity letter process, which was meant to alert customers to excessive trading, was found to be ineffective. The firm's letters did not provide sufficient information to customers about the trading activity or prompt comprehensive follow-ups. Until early 2019, Western's compliance staff did not use updated exception reports that included critical indicators of excessive trading. Even after these reports were introduced, they were not effectively utilized by supervisors.

The settlement also includes a censure and restitution amounting to $1,057,632.70 plus interest. This resolution addresses the firm's violations of FINRA Rules 3110 and 2010, which emphasize the need for effective supervisory systems and adherence to trading regulations.