ETFs - Law Offices of Robert Wayne Pearce

Jun 15, 2017

Oak Ridge Financial Representative Suspended for Unauthorized Trades

Phillip Hinze, of Mendota Heights, Minnesota, submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which he was fined and suspended for placing unauthorized trades in a customer’s account in a one week time span without the customer’s authorization. FINRA investigators found that while registered with Oak Ridge Financial Services Group, Inc., Mr. Hinze placed an order to buy 100 shares of an exchange-traded fund (ETF) for $11,175. Seven days later, Mr. Hinze placed orders to buy 260 shares of two other ETFs and 210 shares of another ETF, for a total of $40,482. The customer had not authorized any of the transactions and quickly complained to the member firm, who cancelled the trades and terminated Mr. Hinze’s employment.

Feb 1, 2017

1st Discount Brokerage Fined by FINRA for ETF Supervisory Failures

1st Discount Brokerage, Inc., of Lake Worth, Florida, submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) for failing to supervise the sales of non-traditional exchange-traded funds (ETFs). 1st Discount Brokerage was subject to similar FINRA disciplinary actions in 2012 and 2015 for the firm’s failure to supervise a registered representative who operated a Ponzi scheme and for failure to supervise its compliance with Section 5 of the Securities Act of 1933, respectively. Registered with FINRA since 1995, 1st Discount Brokerage currently has approximately 27 registered representatives and 20 branch offices. FINRA found that 1st Discount Brokerage failed to establish, maintain, and enforce a supervisory system regarding non-traditional ETFs. Further, FINRA found that 1st Discount Brokerage failed to provide its registered representatives with adequate training and guidance on suitability considerations for these complex, speculative investment products.

Dec 19, 2016

Wells Fargo Broker Suspended for Unsuitable Discretionary Trades

Robert Batchen, a broker formerly employed with the Skokie, Illinois branch of Wells Fargo Advisors, LLC (Wells Fargo), submitted a letter of Acceptance, Waiver, and Consent in which he consented to, but did not admit to or deny, the Financial Industry Regulatory Authority’s (FINRA) findings that he made unsuitable discretionary trades in his customer’s accounts, causing losses in excess of $56,000. FINRA found that Robert James Batchen, of Wheeling, Illinois, exercised discretion in his customer’s accounts without the written authorization of the customer of his member firm, in violation of NASD Rule 2510(b). Mr. Batchen is alleged by FINRA to have effected more than 900 discretionary trades during the relevant time period.

Oct 3, 2016

First Financial Equity and CCO Named in FINRA Complaint for Failure to Supervise Violations

Scottsdale, Arizona-based First Financial Equity Corporation (First Financial) and the firm’s Chief Compliance Officer (CCO), Melissa Ann Strouse, were named in a Financial Industry Regulatory Authority (FINRA) complaint alleging that the firm failed to establish and maintain a proper supervisory system with respect to the appropriateness of fee-based accounts and the monitoring of accounts for potential churning and excessive trading. Melissa Strouse was named in FINRA’s complaint amidst allegations that as the firm’s CCO, she was responsible for ensuring the firm’s compliance with supervisory procedures. According to the FINRA complaint, First Financial Equity had inadequate written supervisory procedures (WSPs) with respect to the appropriateness of fee-based accounts for the firm’s customers and had no system in place to address situations where excessive fees may have been charged. Further, the Complaint alleges that First Financial failed to maintain and enforce a supervisory system related to its options business and that the firm allegedly had no WSPs for the supervision, approval and sale of exchange-traded funds (ETFs). For her part, the Complaint alleges that Melissa Strouse failed to ensure that the WSPs covered all required areas and were amended as needed.

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.

May 2, 2016

Alton Securities Group Representative Suspended for Failing to Supervise ETF and Mutual Fund Recommendations

Matthew Maberry, a Registered Principal with the Alton, Illinois branch of Alton Securities Group, Inc. (Alton Securities) submitted a Letter of Acceptance, Waiver and Consent (AWC) in which he was fined and suspended by the Financial Industry Regulatory Authority (FINRA) for failing to adequately supervise the exchange-traded fund (ETF) and mutual fund recommendations and sales by registered representatives under his supervision. Matthew Dale Maberry, of Bethalto, Illinois, was the Chief Executive Officer and Chief Compliance Officer with Alton Securities and was responsible for the design and implementation of the firm’s supervisory system. FINRA found that Mr. Maberry failed to ensure that this supervisory system was implemented to supervise the sales activity of its registered representatives. Specifically, FINRA stated that the supervisory system was not reasonably designed to ensure that employees made suitable recommendations of complex investment products such as non-traditional ETFs and non-traditional mutual funds.

Dec 31, 2015

Coral Springs, Florida GMS Group Representative Barred for Misconduct

Jason Figueroa of Coral Springs, Florida submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for allegedly engaging in unsuitable transactions in leveraged and inverse leveraged exchange traded funds (ETF’s) that he did not understand. Mr. Figueroa first became associated with FINRA through The GMS Group, LLC (GMS) in 2006. In March 2015, Mr. Figueroa was terminated by GMS due to a series of client complaints and settlements. In June 2009, FINRA released a regulatory notice pertaining to ETF’s. It stated that it was the responsibility of the firm and its representatives to understand the unique features of ETFs and their typical holding period (one day). In 2011, Mr. Figueroa revised his investment strategy for 4 client accounts who were inexperienced in investing and had moderate risk tolerance.

Nov 23, 2015

Royal Securities Broker Barred by FINRA for Unsuitable ETF Recommendations

Allen Michael Green, a former registered representative with the Ypsilanti, Michigan branch of Royal Securities Company (Royal Securities) submitted a Letter of Acceptance, Waiver and Consent (AWC) in which he consented to, but did not admit to or deny, the Financial Industry Regulatory Authority’s (FINRA) findings that he made unsuitable non-traditional exchange traded funds (ETF) recommendations to a disabled customer who had limited financial resources, causing the customer massive investment losses. According to FINRA, Allen Green believed that the world economy was on the brink of collapsing and recommended almost exclusively to invest in securities with precious metals, natural resources, commodities, and energy. Mr. Green allegedly recommended that his customer liquidate her existing variable annuity, which included a surrender charge of $59,583. As a result of following Mr. Green’s unsuitable recommendations, his client lost at least $193,165 which does not include the variable annuity surrender charge.

Aug 7, 2015

First Allied Representative Daniel Grieco Suspended by FINRA

Daniel Grieco of Middletown, New Jersey submitted a Letter of Acceptance, Waiver and Consent (AWC), without admitting or denying the findings, to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for allegedly recommending trades to customers without having reasonable grounds to believe the investments were suitable. Grieco entered the securities industry in 1983 and has been registered as a General Securities Representative at FINRA member First Allied Securities, Inc. since August 2010. FINRA found that between July 21, 2008 and July 19, 2013, Grieco recommended and caused to be executed transactions of various leveraged and inverse-leveraged ETFs in 15 customer accounts. The ETFs were designed to achieve their designed to achieve their objectives over the course of one day. However, the ETF were held for much longer periods, in some cases for more than five years. FINRA alleged that Grieco, in extending the holding period of the ETFs, failed to appreciate the nature of the ETFs at the time of his recommendations, to wit, that they were not designed to achieve their objectives for extended holding periods. Therefore, FINRE concluded that Grieco did not have reasonable grounds to believe his recommendations were suitable and thereby violated NASD Rules 2310 and 2010.

May 8, 2015

LPL Financial Hit with $11.7 Million Fine for Failure to Supervise Investment Sales

LPL Financial LLC (LPL Financial) was fined $11.7 million by the Financial Industry Regulatory Authority (FINRA) for failing to maintain a proper supervisory system with respect to the sales of complex investment products, such as exchange-traded funds (ETFs), variable annuities, mutual funds, and non-traded real estate investment trusts. Without admitting or denying the findings, LPL Financial consented to FINRA’s sanctions and findings that if failed to enforce its supervisory procedures for the sales of non-traditional ETFs, such as leveraged, inverse, and inverse-leveraged ETFs. Specifically, FINRA found that LPL Financial failed to enforce allocation limits with respect to customers’ investment objectives in its sales of non-traditional ETFs. LPL also failed to ensure that some of its registered representatives were adequately trained to sell the ETFs.