Established in Dallas, Texas in 1972, Southwest Securities, Inc. is a subsidiary of SWS Group, Inc. Southwest Securities is now a member firm of the New York Stock Exchange and the largest Texas-based broker-dealer. As a full-service brokerage firm, Southwest Securities sells insurance, securities, and other investment products and services and provides managed accounts to individual investors and small businesses.
Licensed by the Financial Industry Regulatory Authority (FINRA), Southwest Securities is obligated to create systems of supervision and oversight over their representatives. These systems ensure that Southwest brokers are acting in their clients’ interests within the confines of the law. When oversight fails and brokers violate regulations in ways that cause damages to investor assets, firms can be held legally liable to reimburse losses.
Southwest Securities unfortunately has a significant history of regulation violation and abuse of trading laws. Their behavior of this kind often results in massive losses or defrauding for clients. Some significant disciplinary actions in Southwest Securities’ history includes illegal activity and outright deception to both clients and legal authorities.
Not Disclosing Available Discounts
Some mutual funds have discounts available to investors, but many of these discounts went unreported to clients at Southwest Securities, despite their moral and legal obligation to act in the clients’ interests. In an investigation of their accounts, it was found that over 90% of Southwest Securities mutual fund investors were entitled to discounts that they were never notified about.
The lack of discounts allowed brokers to receive higher commissions at the expense of their customers. Southwest was forced to pay out to their clients the amount they would have received under the discounts that were hidden from them.
Illegal Late Trading
Trading after the markets close is known as “late trading,” and it allows brokers to take advantage of end-of-day prices without reporting any loss in shared value to investors. In short, brokers rob existing investors in order to draw new ones in. Southwest Securities paid $10 million in fines for deceptive late trading, in addition to fines levied against three senior officers at Southwest Securities.
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