Suspension and Restitution Order for Dennis D. Herrera from Excessive Trading Allegations

The Financial Industry Regulatory Authority (FINRA) sanctioned Dennis D. Herrera (CRD No. 4618370) for engaging in excessive and unsuitable trading activity in two retail customer accounts between January 2019 and February 2023. FINRA determined that Herrera’s recommendations were not in the customers’ best interests and violated Rule 15l-1(a)(1) of the Securities Exchange Act of 1934 (Regulation Best Interest), as well as FINRA Rules 2111 and 2010. Herrera consented to a six-month suspension, a $5,000 fine, and an order to pay $158,500 in restitution plus interest to the affected clients.

Herrera began his career in the securities industry in 2003 and was registered as a General Securities Representative with Aegis Capital Corp. (CRD No. 15007) from March 2016 through October 2023. Although no longer associated with a FINRA member firm, he remains under FINRA’s jurisdiction pursuant to its by-laws.

Under Regulation Best Interest (Reg BI), brokers must act in the best interest of retail customers and may not place their own financial interests ahead of the client’s. Excessive trading occurs when the volume of recommended transactions is so high that it becomes inconsistent with a client’s investment goals and profile. FINRA uses metrics such as the turnover rate (how often the account’s holdings are replaced) and cost-to-equity ratio (the annual return needed to break even on commissions and fees). As a general benchmark, a turnover rate above 6 or a cost-to-equity ratio above 20% indicates potential excessive trading.

FINRA found that Herrera exercised de facto control over the accounts of two customers who routinely followed his recommendations. For one client—a 68-year-old plumber—Herrera executed 205 transactions, resulting in a 12 annualized turnover rate and a 25% cost-to-equity ratio. This activity generated $123,557 in commissions and caused $270,219 in realized losses. For the second client, a 56-year-old consultant, Herrera made 118 trades with a 6 annualized turnover rate and a 28% cost-to-equity ratio, producing $34,943 in commissions and $88,760 in losses. FINRA concluded that this trading activity was excessive, unsuitable, and not in the customers’ best interests, in violation of Reg BI and FINRA’s ethical standards.

Lufrano Law, LLC is a national investment litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. Please contact us at (800) 627-2179 for more information if you have been the victim of investment negligence or fraud.

The content on this site reflects personal opinions and does not constitute statements of fact. No findings have been made against the firms or individuals mentioned. This blog is intended solely for educational purposes, drawing on publicly available information to provide general insights and a basic understanding of the law. It is not a substitute for legal advice.