Brokerage Firms In The News - Law Offices of Robert Wayne Pearce

Jul 13, 2016

New York Princor Investment Representative Fined and Suspended for Unsuitable Annuity Recommendations

Michael Taylor of Buffalo, New York was registered with FINRA as an Investment Company Products and Variable Contracts Limited Representative through Princor Financial Services Corporation (Princor) from 2010 until March 16, 2016. Mr. Taylor submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for allegedly failing to identify and submit seven variable annuity purchases as annuity replacements even though each was funded by the sale of another annuity. According to FINRA, from December 2010 through May 2011, Mr. Taylor “circumvented Princor’s compliance procedures by failing to identify and submit seven variable annuity purchases as annuity replacements even though each was funded by the sale of another annuity. In addition, Taylor provided inaccurate information on the annuity transaction documents further concealing that they were replacements.” This alleged conduct would be in violation of NASD Conduct Rule 3110 and FINRA Rule 2010.

Jul 11, 2016

Florida Wells Fargo Representative under Investigation for Converting Client Funds

Jeffrey Krupnick of Sarasota, Florida was named as a respondent in a Financial Industry Regulatory Authority (FINRA) complaint for allegedly converting a client’s funds for his own personal use. FINRA alleged that Mr. Krupnick, between January 2012 and November 2014, while registered with FINRA member firm Wells Fargo Advisors, LLC (Wells Fargo) converted approximately$143,000 from his half-brother, a Wells Fargo customer. FINRA alleged that due to over $50,000 in accumulated credit-card debt, Mr. Krupnick attempted to take advantage of his half-brother in a scheme to cover his losses. The FINRA investigators found that Mr. Krupnick opened several brokerage accounts for his half-brother for which he took control over and took funds from. FINRA alleged that Mr. Krupnick removed over $170,000 from 4 brokerage accounts he had created for his half-brother in October 2013. Furthermore, FINRA found that Mr. Krupnick named himself as the primary account holder on the joint accounts and assumed primary control over them even though he never contributed funds to the accounts and instead used the ill-gained funds to pay credit card bills, home payments, and other luxuries including a wedding in Hawaii.

Jul 8, 2016

PNC Investments Agrees to Pay Mutual Fund Customers Restitution of $224,750

PNC Investments LLC (PNC) of Pittsburgh, Pennsylvania submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for allegedly disadvantaging customers in sales of mutual fund shares. PNC has been a FINRA member since December 2003 and has over 1,982 branch offices throughout the U.S. FINRA found that from at least July 1, 2009, PNC disadvantaged certain retirement plan customers that were eligible to purchase Class A shares in certain mutual funds without a front-end sales charge. There are typically three classes of mutual fund shares: A, B, and C; all with different sales charges, management fees and other terms and conditions. Class A shares generally have the highest initial sales charge and Class B and C shares typically do not carry a front-end sales charge but have significantly higher distribution and service fees and may be subject to a contingent deferred sales charge.

Jul 6, 2016

Robert W. Baird & Co. Agrees to Pay $2.1 Million in Restitution to Mutual Fund Customers

Robert W. Baird & Co. Inc. (Baird) of Milwaukee, Wisconsin submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for allegedly taking advantage of certain retirement plan and charitable organization customers that were eligible to purchase Class A shares in certain mutual funds without a front-end sales charge. Baird has been a FINRA member since 1971 and has over 140 branch offices throughout the U.S. In May 2015, Baird self-reported to FINRA that many eligible customers had not received available sales charge waivers. Baird estimated that since July 1, 2009, approximately 1,400 accounts purchased mutual fund shares for which an available sales charge waiver was not applied. Baird estimated that clients were overcharged approximately $1.8 million since July 2009 due to its supervisory failures.

Jul 4, 2016

World Equity Group Fined for Alleged Churning

World Equity Group, Inc. (WEG) of Arlington Heights, Illinois submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for alleged supervisory failures in connection with excessive equity securities trading. WEG, a FINRA member since 1992, has been the subject of similar FINRA disciplinary actions. According to FINRA, between 2009 and 2012, WEG failed to detect and prevent excessive trading, also known in the securities industry as “churning.” Churning is excessive trading in client accounts by a stockbroker to generate commissions. Churning is an illegal activity that violates SEC and FINRA rules. During the relevant time period (2009 through 2012), FINRA alleged that WEG’s supervisory failures led to an ongoing practice of churning. FINRA found a pattern of excessive unsuitable trades in WEG customer accounts, therein violating NASD Rules 3010, 3310, 2310, 2110, and FINRA Rule 2010. It is the responsibility of the investment advisor and his/her associated member firm to ensure clients are treated fairly and not taken advantage of. Firm representatives are required to recommend investment strategies that comply with multiple criteria regarding an individual including investment objectives, financial status and age. Excessive trading is a violation of FINRA Rules as it generally disadvantages the customer in order for the broker to generate additional commissions.

Jul 1, 2016

J.P. Morgan Branch Fines Exceed $1 Million for Unsuitable Activity

J.P. Morgan Clearing Corp. (JPMCC) of Brooklyn, New York and J.P. Morgan Securities LLC (JPMS) of New York, New York submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for alleged unsuitable broker activity. The Suitability Rule (FINRA Rule 2011) is the most fundamental rule brokerage firms and associates must abide by in recommending investments to customers. Brokers must recommend appropriate investments given the customer’s objectives, financial condition, tax status, etc. This rule lays out the three main suitability obligations requiring brokers to (i) perform due diligence to understand the risks of an investment or investment strategy, and determine whether it is suitable for anyone, (ii) have a reasonable basis for believing the investment strategy is suitable for the particular customer based on that customer’s investment profile; and (iii) have a reasonable basis for believing that a series of securities transactions are not excessive (if the broker has control over the account). In the case of JPMCC and JPMS, FINRA found that JPMS failed to send letters to customer accounts confirming changes in their investment objectives.

Jun 29, 2016

Tampa Firm Fined $175,000 and Ordered to Pay Over $400,000 in Restitution for Supervisory Failures

INVEST Financial Corporation (IFC) of Tampa, Florida submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement for the Financial Industry Regulatory Authority (FINRA) for alleged supervisory failures in connection with Unit Investment Trust (UIT) transactions with its customers. A UIT is generally a portfolio of redeemable securities (units) that can contain several different types of securities with a specified lifetime. The most common of these securities are stock and bond trusts. UITs are created with a definite life and are a fixed portfolio of securities. This makes UITs different from a mutual fund that allows its securities to be bought and sold in perpetuity. Sales charge discounts are often offered to customers who periodically reinvest in a UIT which is also known as a rollover. The UIT sponsor can also offer “breakpoints” which distribute sales charge discounts depending on the amount invested.

Jun 27, 2016

Miami Brokerage Firm CP Capital Securities Fined for Illegitimate Private Placement Offering

CP Capital Securities, Inc. (CP) of Miami, Florida submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for allegedly failing to maintain proper supervisory procedures in connection with private placement offerings. FINRA noted that CP had participated in several minimum contingency private placement offerings without “adequate supervisory procedures.” A private placement is generally an offering between only a select few investors in order to raise capital without registration. Private placement offerings must satisfy certain conditions to avoid registration with the Securities and Exchange Commission (SEC). CP’s failure to supervise those offerings put the exemptions in jeopardy.

Jun 24, 2016

New York Brokerage Firm BGC Submits AWC to FINRA in Connection with Reporting

BGC Financial L.P. (BGC) of New York submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Regulation for the Financial Industry Regulatory Authority (FINRA) for an alleged “pattern or practice” of late reporting and failing to report transactions to regulators. BGC became associated with FINRA in July 1987 and has faced 15 regulatory events since its formation. Between August 31, 2012 and January 21, 2015, BGC submitted five AWC’s in relation to SEC Rule 17a-3 and FINRA Rule 6730(a) which “prescribes minimum standards for the creation, retention and preservation of records applicable to broker-dealer.” From January 2015 to March 2015, FINRA’s Department of Regulation reviewed BGC’s reporting to the Trade Reporting and Compliance Engine (TRACE) and found that BGC failed to report 100 transactions of TRACE-eligible Securitized Products within 15 minutes of their execution.

Jun 13, 2016

FINRA Hits Oppenheimer with a $2.9 Million Fine for Failure to Supervise ETF Sales

Oppenheimer & Co., Inc. (Oppenheimer) has been hit with a fine of $2.25 million and ordered to pay restitution to affected customers of over $716,000 for failing to supervise the unsuitable sales of leveraged, inverse and inverse-leveraged exchange-traded funds (non-traditional ETFs). According to FINRA, Oppenheimer failed to enforce its own policies with respect to the solicitation and recommendation of ETFs by its registered representatives. Although Oppenheimer put ETF-related policies in place in 2009 (in response to FINRA Regulatory Notice 09-31), its representatives continued to solicit customers and to execute non-traditional ETF transactions despite the customers not meeting Oppenheimer’s criteria for suitability, e.g. having liquid assets of more than $500,000. FINRA’s findings state that Oppenheimer representatives carried out more than 30,000 ETF transactions, totaling approximately $1.7 billion during the relevant time period.