Arive Capital Markets Fined $300,000 by FINRA for Supervisory Failures

Staten Island, NY-based brokerage firm Arive Capital Markets has been censured and fined $300,000 by the Financial Industry Regulatory Authority (FINRA) for systemic supervisory failures related to excessive trading and telemarketing violations. According to the Letter of Acceptance, Waiver and Consent (AWC) issued by FINRA, from August 2016 to June 2020, Arive failed to establish and maintain a reasonable supervisory system and written procedures to detect and prevent excessive trading in customer accounts.

During this period, registered representatives at Arive excessively traded in 12 customer accounts, causing the customers to pay a total of nearly $640,000 in commissions, costs and margin interest. The firm failed to identify numerous red flags of excessive trading such as high turnover rates and cost-to-equity ratios.

FINRA found that Arive's written supervisory procedures lacked guidance on how to identify and investigate potentially excessive trading activity. The firm also failed to reasonably utilize exception reports from its clearing firm meant to flag excessive trading concerns.

In addition, from June 2018 through February 2019, Arive failed to establish and maintain adequate supervisory procedures governing telemarketing activities. The firm's procedures lacked guidance on complying with do-not-call lists and time-of-day restrictions on telemarketing calls. As a result, Arive representatives made over 60,000 outbound telemarketing calls to numbers on the national do-not-call registry during this period, as well as calls to numbers on the firm's internal do-not-call list outside of permissible hours.

Beyond the $300,000 fine, Arive was ordered to pay restitution of $594,928.74, plus interest, to customers whose accounts were excessively traded. The firm must also review and revise its written supervisory procedures to prevent future violations. In settling this matter, Arive neither admitted nor denied the charges, but consented to the entry of FINRA's findings. The sanctions were imposed by FINRA's National Adjudicatory Council.

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