Broker Surveillance Proposed by Finra to Thwart Overcharging

The Financial Industry Regulatory Authority, Wall Street’s self-funded overseer, proposed a trading-surveillance system to prevent brokers from overcharging their customers.

The regulator is considering collecting trade and commission data automatically to help it spot suspicious activity, according to a statement today on its website. Finra is gathering industry feedback on the proposal until February.

Finra, which conducted more than 7,000 examinations of brokers last year and levied about $69 million in fines, said it’s updating its regulatory system in an effort to stamp out overcharging, excessive trading and pump-and-dump schemes. Finra’s current system, focusing on a few months of trade data in periodic exams, may miss some violations, said Susan Axelrod, executive vice president of regulatory operations.

“This takes the guesswork out of the exam,” she said in a phone interview. “It’ll help us be a smarter, better regulator.”

Data collected would include information about accounts, their transactions and security identification that a firm maintains as part of its books and records, according to the statement. Providing data in a standardized format may be a burden for brokers, so Finra is seeking comments, Axelrod said.

(Updates with comments from Finra starting in third paragraph.)
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