FINRA has taken decisive action against brokerage firm Reid & Rudiger LLC, expelling the firm entirely and permanently barring its co-founders, Clifford Reid and Edward Rudiger Jr., from the securities industry. This severe regulatory crackdown comes after investigators discovered the firm operated a pervasive churning scheme that devastated retail customer accounts.

The Allegations According to recent FINRA enforcement reports, the firm and its co-founders excessively traded and churned at least 20 customer accounts over a six-year period. By recommending a high-volume, high-cost market-timing strategy, the brokers made it virtually impossible for clients to generate a profit.

FINRA found this excessive trading was done with reckless disregard for the customers’ best interests, violating the Care Obligation of Regulation Best Interest (Reg BI). In one egregious instance, an account was subjected to an annualized cost-to-equity ratio of 111%—meaning the investments had to generate a 111% return just to break even. In total, the misconduct generated roughly $2 million in commissions while saddling investors with $2.7 million in losses.

What This Means for Investors “Churning” occurs when a broker excessively trades in a client’s account primarily to generate commissions for themselves, rather than to benefit the investor. It is one of the most abusive practices in the financial industry. If your account statements show constant buying and selling with high fees but diminishing returns, your broker might be churning your account. Investors who suffered losses with Reid & Rudiger or any other firm employing these predatory tactics can pursue financial recovery through FINRA arbitration.