FINRA Fines Broker for Excessive Commissions from Risky Trading Strategies


Released November 2016

Lucas Dylan Lichtman (CRD #5542092, Nanuet, New York) submitted an Offer of Settlement in which he was assessed a deferred fine of $7,500 and suspended from association with any FINRA member in any capacity for nine months. Without admitting or denying the allegations, Lichtman consented to the sanctions and to the entry of findings that he made unsuitable recommendations of an active trading investment strategy to his customer. The findings stated that Lichtman recommended that his customer engage in the unsuitable active trading investment strategy, despite the fact that he failed to understand the risks of the investment strategy being recommended, or the impact the staggering commissions and fees generated by this active trading investment strategy would have on his customer’s account. Lichtman did not have any reasonable basis to recommend such a strategy to his customer. As a result of the recommendations Lichtman and other representatives of his member firm made, 15 customer accounts paid over $1 million in commissions and fees.

Additionally, Lichtman did not know how to calculate or even understand cost-to-equity ratios and turnover rates, which are standard industry metrics used to measure whether an account is being excessively traded. Lichtman did not understand the impact of trading and costs on his customer’s account and on the specific transactions recommended as part of an investment strategy. Lichtman did not conduct any due diligence into the active trading investment strategy he was recommending, and he never reviewed his customer’s account, either individually or collectively, to determine if the active trading investment strategy was successful or suitable for his customer. Lichtman failed to perform any analysis of the active trading investment strategy’s costs, risks, potential benefits, volatility, or likely performance in a variety of market and economic conditions. The active trading investment strategy Lichtman recommended was not in the customer’s best interest.

The suspension is in effect from October 3, 2016, through July 2, 2017. (FINRA Case #2014039091903)

Source: FINRA, Financial Industry Regulatory Authority, Inc. 2016
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