Western International Securities Settles with FINRA Over Regulatory Violations

Western International Securities, Inc., a Pasadena-based broker-dealer, has agreed to a settlement with the Financial Industry Regulatory Authority (FINRA) to resolve allegations of multiple rule violations. The settlement, known as a Letter of Acceptance, Waiver, and Consent (AWC), ensures that FINRA will not pursue further action against Western for the issues detailed in the agreement.

Western has faced several regulatory actions in recent years. In November 2022, the company agreed to a settlement with FINRA after being accused of failing to properly supervise recommendations of non-traded real estate investment trusts and not reporting customer complaints and settlements in a timely manner. The firm was fined $400,000 and ordered to pay $471,000 in restitution.

In January 2021, Western faced another FINRA settlement over claims that it failed to comply with stock option position limits and lacked adequate supervisory systems. This resulted in a $20,000 fine.

Further, in May 2020, Western was fined $325,000 for not updating registration forms to disclose financial issues among its representatives. This action included hiring an independent consultant to improve the firm’s compliance.

In July 2019, Western was fined $75,000 for not ensuring that customers received appropriate mutual fund sales charge waivers.

Current Allegations

From January 2016 through June 2020, Western failed to properly supervise trading activities, leading to excessive and unsuitable trading in approximately 100 customer accounts. This oversight resulted in customers incurring over $2.5 million in trading costs. FINRA’s investigation revealed that Western's supervisory systems were inadequate in identifying and responding to red flags indicating excessive trading.

Under the current settlement, Western has agreed to several sanctions:

• A censure and a fine of $475,000.
• Restitution payments totaling over $1 million to affected customers.
• Implementation of a plan for heightened supervision for specific representatives.
• Certification of remedied supervisory systems to address the violations.

Western is required to pay the fine and restitution promptly and submit proof of these payments to FINRA. If unable to locate all affected customers, the firm must comply with relevant unclaimed property laws.

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