Five financial broker-dealers, including two on Long Island, were fined between $60,000 and $300,000 for padding "handling fees" on trades, on top of commissions, officials said.
The Financial Industry Regulatory Authority said the companies "routinely" charged fees that "far exceeded" actual postage and other handling costs. Investigators found fees ranging from $65 to $99 per trade for such tasks as sending the customer confirmation of the trade. At some firms, the agency said, the fees were a "substantial percentage" of revenues.
Securities laws require accurate detailing of fees, and marked-up fees meant the firms understated commissions paid by clients, said Brad Bennett, FINRA's executive vice president and chief of enforcement.
But field examiners noticed the practice of marking up handling fees in the industry, he said. They then targeted brokers with the biggest gap between fee and cost or with the biggest profits from the fees.
"Customers were misled," Bennett said. "If something is a commission, you've got to call it a commission."
A&F Financial Securities in Syosset charged $65 in handling, did not properly supervise employees and provide required continuing education for them, FINRA said. It was fined $125,000. Company officials did not return calls.
Salomon Whitney in Babylon Village charged $69 and was fined $60,000. A man who answered the phone declined to identify himself and to comment. Another call to the chief executive was not returned.
The other companies are Pointe Capital in Florida, with a $95 fee and $300,000 fine; John Thomas Financial in Manhattan, with a $75 fee and $275,000 fine; and First Midwest Securities of Illinois, with a $99 fee and $150,000 fine.
In settling with FINRA, the companies did not admit or deny guilt but agreed to have the findings entered in FINRA's files, revise procedures and train workers.
This year, the Connecticut banking department fined both of the cited Island brokers over the same issue and required them to reimburse clients in trades dating back to 2008.
A&F Financial Securities was fined $20,000 and gave back $38,000 to clients, state officials said, while Salomon Whitney was fined $12,500 and gave back $10,500.