Back to Markets
Stocks● Neutral
FINRA Expels Reid & Rudiger, Bars Founders Over $2.7M in Client Losses
FINRA expelled Reid & Rudiger and barred its co-founders after clients paid $2 million in commissions and lost $2.7 million from high-volume trades pushed across 20 accounts.
Continue with
The Financial Industry Regulatory Authority expelled New York broker-dealer Reid & Rudiger and barred its two co-founders from the industry, citing excessive churning that cost clients $2.7 million in losses on $2 million in commissions.
FINRA said the firm's business model centered on recommending high-volume, high-cost market-timing strategies to high-net-worth investors reached through cold calling. The agency's 43-page settlement claims the firm violated the SEC's Regulation Best Interest rule and FINRA's own mandates.
"The egregious churning and excessive trading in this case resulted in significant customer losses over nearly six years," FINRA Enforcement Head Bill St. Louis said in a statement. He called the case an example of the agency's "unique role" as a self-regulatory organization.
From roughly 2018 to 2023, co-founders Clifford Reid and CEO Edward Rudiger Jr. recommended clients swap large positions in well-known equity securities, frequently using margin. The recommendations were supposedly based on research by the firm's supervisor, Marc Harrison. According to FINRA, the co-founders pushed the same trades across 20 accounts regardless of individual investment profiles. Several of those accounts were churned at a level FINRA described as committed with intent to defraud or "reckless disregard."