The Securities and Exchange Commission (SEC) has fined a barred broker, Christopher Booth Kennedy, $2.1 million for allegedly orchestrating a trading scheme that caused millions in losses to his clients and attempting to conceal it.
Kennedy, previously associated with Western International Securities, engaged in excessive trading across 19 accounts between July 2020 and July 2021, incurring over $9 million in client losses, according to the SEC. Clients paid nearly $1.3 million in commissions during this period, of which $958,134 went directly to Kennedy. Regulators allege that Kennedy’s day-trading strategy, which primarily involved buying and selling options contracts, was unsuitable for clients with moderate or conservative risk tolerances.
The brokerage sector’s self-regulatory organization, FINRA, barred Kennedy from the industry in November 2023. Kennedy did not provide a public comment on the matter, and court records suggest he has not retained legal representation for the SEC proceedings. Western International Securities also declined to comment.
In a related matter, Western settled charges with the SEC in July, agreeing to pay a $140,000 fine and accept a censure without admitting or denying misconduct. The SEC alleged that Western failed to adequately supervise Kennedy. Western, acquired by Atria Wealth Solutions in 2020 and subsequently by LPL Financial earlier this year, has faced repeated scrutiny for compliance deficiencies.
According to BrokerCheck, Western’s regulatory history includes 15 events, several involving supervision failures, unsuitable product sales, and incomplete disclosures. Notably, in June 2022, the SEC’s first enforcement action under Regulation Best Interest targeted five Western brokers for allegedly selling $13 million in high-risk bonds to retail investors.
Kennedy’s alleged scheme involved high-volume trading that misaligned with his clients’ investment profiles. During the alleged misconduct, Kennedy managed approximately 150 clients with $60 million to $70 million in assets, with the 19 accounts affected by the fraud holding roughly $22 million. The SEC contends that Kennedy shifted from day-trading stocks to trading high-risk options contracts with short expiration periods starting in June 2020. Despite having limited experience with such strategies, Kennedy’s trading activity surged.
Over the one-year period, Kennedy’s trades averaged $2.4 million per account each month, despite the average client balance being just $721,059. In total, the trading volume across the 19 accounts reached nearly $364 million. The SEC claims Kennedy prioritized generating commissions over his clients’ best interests. In fact, Kennedy reportedly earned more commissions in 2021 than any of Western’s other 450 representatives, even though he was dismissed in late August after only eight months of employment due to the allegations.
Kennedy’s supervisor suggested switching clients to fee-based accounts to reduce commission costs, but Kennedy allegedly refused. The SEC asserts that this refusal underscores his intent to maximize personal financial gain. To further conceal the losses, Kennedy is accused of issuing falsified account statements. In one instance, a client reportedly received at least five fraudulent monthly statements, including one indicating the account was worth $5 million when its actual value was closer to $100,000.
For registered investment advisors (RIAs) and wealth managers, this case underscores the critical importance of client-centric practices, transparent communication, and robust supervisory frameworks. Kennedy’s actions serve as a stark reminder of the potential risks posed by excessive trading and unsuitable investment strategies. RIAs are advised to evaluate their supervision and compliance protocols to prevent similar issues within their practices.
