Regulation Best Interest and Excessive Trading: What a Recent FINRA Complaint Reveals

When excessive trading occurs in a retail investment account, the financial damage often extends far beyond market losses. High commissions, margin interest, and frequent turnover can quietly erode principal even in favorable market conditions. A recent enforcement action highlighted by InvestmentNews provides a clear example of how regulators evaluate these risks under Regulation Best Interest (Reg BI) and longstanding FINRA supervision rules.

In January 2026, InvestmentNews reported on a complaint filed by the Financial Industry Regulatory Authority (FINRA) against Sutter Securities Incorporated and its former CEO, Keith Charles Moore. The complaint alleges that the firm permitted what regulators described as “ruinous” trading in the accounts of an elderly investor. This case offers important lessons for investors, families monitoring retirement accounts, and legal professionals.

Overview of the FINRA Complaint

According to the Department of Enforcement, the complaint (Case #2021071987902) alleges that between March 2020 and July 2021, a Sutter Securities representative executed more than 2,200 trades in two trust accounts belonging to an 89-year-old retired semiconductor executive. The trading activity reportedly generated nearly $3 million in total trading costs—including over $2.8 million in commissions—and resulted in over $1.2 million in realized losses.

Regulators further allege that this high-velocity trading was fundamentally inconsistent with the customer’s stated objectives of long-term growth and a moderate risk tolerance. Based on FINRA’s analysis, the strategy prioritizes revenue generation for the firm over the financial well-being of the client.

Cost-to-Equity and Turnover: Key Red Flags

The FINRA complaint places heavy emphasis on two quantitative metrics that serve as primary indicators of excessive trading and “churning”:

FINRA found annualized Cost-to-Equity Ratios as high as 46% and 52% in the investor’s accounts. This means the accounts would have needed to generate an annual return of over 50% just to break even after paying commissions and expenses. In the world of securities arbitration, a cost-to-equity ratio above 20% is typically considered a major red flag for excessive trading.

Turnover Rates The accounts reportedly saw turnover rates as high as 16. This indicates that the entire portfolio was essentially sold and replaced 16 times in a single year. For a retired investor with a “long-term growth” objective, such a rate is generally considered evidence of a quantitatively unsuitable strategy.

Regulation Best Interest and the Care Obligation

Regulation Best Interest, which went into effect in June 2020, requires broker-dealers to act in the best interest of retail customers. A central component of this is the “Care Obligation.” Importantly, this rule applies not only to individual trades but to a series of transactions evaluated together.

FINRA alleges that Sutter Securities violated Reg BI because the cumulative trading strategy failed to consider the client’s age, goals, and financial profile. Even if an individual trade seemed defensible, the sheer volume of 2,200 trades over 17 months made the overall strategy inherently harmful.

Alleged Supervisory Failures

Beyond the broker’s individual conduct, the enforcement action focuses heavily on the firm’s supervisory systems. FINRA rules require firms to maintain reasonably designed procedures to detect and prevent misconduct. The complaint alleges that Sutter Securities and Keith Charles Moore failed to respond to multiple red flags, including:

• High trading volumes and massive commissions relative to the account size.
• Substantial financial losses occurred while the broker claimed to be using a “replication strategy.”
• The absence of quantitative controls, such as automated systems to flag high turnover or cost-to-equity ratios.
• Inadequate oversight of electronic communications, including a fragmented email review process.

Heightened Scrutiny for Elderly Investors

FINRA has consistently emphasized that cases involving elderly or retired investors warrant heightened scrutiny. Older investors often have fixed incomes and reduced time horizons to recover from substantial losses. In this matter, the customer’s age—89—was a central factor in the allegations of investor harm and the firm’s failure to intervene.

What Investors Can Learn

While a FINRA complaint represents allegations rather than final findings, this case provides a valuable blueprint for investors reviewing their own accounts:

Trading Costs Are Critical. Even in a strong market, excessive commissions can make it mathematically impossible for an investor to profit. Always check your “cost-to-equity” ratio if you notice frequent trade confirmations.

Strategy Must Match Objectives. If your goal is long-term growth, a strategy involving thousands of trades is almost never appropriate. Ensure your “Account Profile” with your firm accurately reflects your actual goals.

Firms Have a Duty to Act. Brokerage firms cannot simply watch from the sidelines while an account is depleted by fees. They have a legal obligation to investigate and stop suspicious patterns.

Sonn Law Group: Focused on Investor Protection

Sonn Law Group represents investors nationwide in FINRA arbitration and litigation involving excessive trading, unsuitable recommendations, and failures to supervise. Jeffrey Sonn brings decades of experience to these complex cases, helping families navigate the recovery process when a firm fails in its duties.

If you are concerned about high trading activity in your account or are reviewing the investments of an elderly family member, our attorneys can help evaluate whether regulatory standards were met. To read the full allegations, investors may consult the public records available through FINRA’s Disciplinary Actions database.

For a confidential consultation regarding your rights or potential recovery options, contact Sonn Law Group today.

Source: InvestmentNews, “FINRA complaint slams California firm for ‘ruinous’ trading in senior client’s account,” January 21, 2026.