Corporate Investments Group (CIG) entered into a Letter of Acceptance, Waiver and Consent (AWC) with the Financial Industry Regulatory Authority (FINRA). FINRA alleged that between December 2010 and June 2012, CIG executed 91 option transactions in 20 customer accounts and charged markups or markdowns which they deemed to be excessive and unfair. The firm also allegedly failed to establish, maintain and enforce adequate written supervisory procedures related to proprietary and riskless principal trading and the establishment of fair prices related to securities transactions, according to the FINRA AWC. According to FINRA rule: “when a firm buys for its own account from its customer, or sells for its own account to its customer, it shall buy or sell at a price which is fair, taking into consideration all relevant circumstances, including market conditions with respect to such security at the time of the transaction, the expense involved, and the fact that it is entitled to a profit.” If a firm does not buy or sell at a price which is fair, it can be held liable for investment losses.
CIG executed the options with markups or markdowns ranging from 15% to 87%. Some of the transactions included markups or markdowns in excess of 25%. The total overage charges were $5,381.97. FINRA rule also states that “each member [firm] shall establish, maintain and enforce written procedures to supervise the types of business in which it engages and to supervise the activities of registered representative that are reasonably designed to achieve compliance with applicable securities laws and regulations and with applicable FINRA Rules.” One of CIG’s representatives executed two trades involving the same option series on March 1, 2012. One of the transactions resulted in a profit of $150, and the other lost $425. CIG’s written procedures failed to address how the firm would review an instance where a representative was engaging in two types of trading involving the same security. CIG was also held liable for preparing 36 written confirmations in which it inaccurately stated that an option transaction was operated on an agency basis, when it was actually operated on a principal basis. For these transgressions, CIG was fined $20,000 and censured. They were also made to pay disgorgement in the amount of $5,381.97 to the affected customers. If you invested money with CIG, you may be able to recover your investment losses by calling Stoltmann Law Offices at 312-332-4200. We are securities attorneys who concentrate on recovering losses by firms who have been censured and fined by FINRA. The call is free with no obligation.