If you have suffered losses at Summit Brokerage with a broker making excessive trades, please call 303-300-5022.
On November 18, 2021, Summit, through the current owner Cetera, settled a matter with a client for $250,000 concerning broker and advisor David Rhodes. The allegations stem from Rhodes’ unsuitable recommendation of alternative investments. Rhodes worked for Summit despite a history of significant number of lawsuits, terminations, regulatory actions and customer complaints requesting repayment.
On July 2, 2019, FINRA released a statement discussing the sanctions it has imposed on Summit for failing to supervise brokers excessively trading accounts of their investors. FINRA, the Financial Industry Regulatory Authority, is the regulatory organization empowered to regulate securities brokerages, under the oversight of the Securities and Exchange Commission (SEC).
Excessive trading is sometimes referred to as “churning.” This is a form of fraud where the broker makes trades that are more for the brokers benefit than the investor, or create such an unreasonably high cost that the portfolio can only make little to no return without investing in unreasonably risky investments.
The sanction imposed by FINRA totals $880,000 for supervisory failures, including approximately $558,000 in restitution to customers whose accounts were excessively traded by a former registered representative of the firm who was previously barred by FINRA.
FINRA found that from January 2012 through March 2017, Summit, a firm with more than 700 brokers, failed to review automated trade alerts raised by its computer operating system concerning its brokers’ trading activity. As a result, the firm failed to detect that one representative in particular excessively traded securities in the accounts of 14 customers. For example, this broker placed 533 trades for a retired customer over a three-year period, causing her to pay more than $171,000 in commissions.
Just for the 14 customers whose accounts were excessively traded more than 150 alerts for potentially excessive trading. It is currently unknown how many alerts for other brokers were ignored nationwide. Summit received those alerts, but they went largely ignored.
“In this matter, the affected customers paid hundreds of thousands of dollars in commissions as a result of the excessive trading that occurred in their accounts,” said FINRA’s Executive Vice President. “This enforcement action reflects the fact that obtaining restitution for harmed customers remains our highest priority.”
FINRA also found that from June 2015 through March 2018, Summit failed to reasonably supervise its representatives’ use of “consolidated reports,” documents provided to customers summarizing the customer’s net financial worth. These reports included assets held away from Summit. FINRA has previously stated to brokerage firms that, if not rigorously supervised, such reports can communicate inaccurate, confusing or misleading information to customers.
For example, one consolidated report sent by a Summit broker to a customer materially misstated the value of the customer’s investment.
Summit Brokerage is headquartered in Florida, but is licensed in all 50 states including Arizona, California, Colorado, Illinois, New York and Texas. Summit is owned by ARETEC and is affiliated with the Cetera group of companies.
In settling this matter, Summit neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.