Wednesday, December 29, 2010

FINRA Press Release: Excessive Mark-Ups

FINRA Expels APS Financial, Bars Former President and Former Broker for Targeting an Elderly Investor with Fraudulently Excessive Mark-ups

The Financial Industry Regulatory Authority (FINRA) issued a press release today announcing that 
it has expelled APS Financial Corporation, located in Austin, Texas, barred the firm's former President, George Conwill, and barred Peter Aman, a former broker at the firm, in a scheme which overcharged an elderly investor by $1.2 million.
The settlement with APS Financial is detailed in the FINRA AWC No. 20050036446-02. Of the $1.2 million of total undisclosed mark-ups by Aman, $767,000 was considered fraudulently excessive mark-ups. Of the 45 transactions examined by FINRA, 43 transactions were related to the elderly investor and mark-ups ranged from 4.15 percent to 67 percent. FINRA has barred Conwill and expelled APS Financial Corporation for failing to provide proper supervision over the company’s transactions that would allow the company to detect fraudulent excessive mark-ups and for violating rules in trading in certain debt products.

A mark-up is the difference between what the selling price of the security and the market price, or cost price, of the security. A mark-up is not in itself fraudulent or excessive. To determine whether a mark-up is unfair, FINRA considers factors such as the type, availability and price of the security transacted and the content of the disclosure given by the broker to the customer prior to the transaction. Mark-ups are an obvious incentive for retail sales, investors should careful when being sold certain products whose complexity can often obscure and confuse the investors the extra costs attached to the products.

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