Library - Law Offices of Robert Wayne Pearce

Former Wells Fargo Stockbroker Demaurio Clark Barred for Theft

Demaurio Cortez Clark, of Acworth, Georgia submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which he was barred for converting an elderly customer’s funds for his personal use. Demaurio Clark was registered with Wells Fargo Clearing Services, LLC (Wells Fargo) as an investment company and variable contracts product representative. From July 2018 to July 2019, FINRA found that Mr. Clark converted $16,560 from an elderly customer and used the money for his personal use. According to FINRA, Mr. Clark opened a brokerage account for his customer without the customer’s knowledge or consent and transferred the $16,560 into his own personal checking account. These transfers were made without the customer’s knowledge or consent. FINRA Rule 2150(a) provides that no “person associated with a member [firm] shall make improper use of a customer’s securities or funds.” Conversion of customer funds is a violation of FINRA Rule 2150(a) and FINRA Rule 2010, which requires associated persons to “observe high standards of commercial honor and just and equitable principles of trade.” By converting customer funds for his personal use, Mr. Clark allegedly violated FINRA Rules 2150(a) and 2010. Without admitting or denying FINRA’s findings, Demaurio Cortez Clark consented to the sanctions and has been barred from association with any FINRA member in all capacities.

Jun 29, 2020

Former Cape Securities and Oakbridge Financial Services Broker Dana Vietor Barred for Engaging in Private Securities Transactions

Dana Bruce Vietor of Dallas, Texas submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) and agreed to be barred for allegedly engaging in private securities transactions, also known as selling away. Between January 1, 2014 and November 11, 2018, while registered with Cape Securities and Oakbridge Financial Services, Dana Vietor is alleged by FINRA to have engaged in private securities transactions totaling more than $3 million without written notice or approval from his member firms. The FINRA findings state that Mr. Vietor sold promissory notes to at least 40 customers. The promissory notes, called Deposit Agreements, were part of a start-up business venture for which Mr. Vietor was a member of the management team and, therefore, received indirect compensation for his involvement in the sale of the promissory notes, in violation of FINRA Rules 3280 and 2010.

Jun 28, 2020

Watch Out United States ETN Investors—Exchange Traded Notes Can Be Extremely Volatile!

While the popularity of exchange traded notes (“ETNs”) has surged, ETNs can be extremely volatile, and investors run the risk of losing their entire investment. ETNs reportedly hold $17.4 billion in assets, up from under $5 billion five years ago. Exchange traded notes issued by Credit Suisse have recently traded at prices that were far above and below the true value of the ETN (See “2 ETNs’ manic swings point out peril of use,” by Jason Kephart, InvestmentNews). The true value of an exchange traded note (or any fund) is the net value of the tracked (or held) index or other asset. But when an asset gets hot, like ETNs, it can get overbought, and when something happens to dry up demand, it can get oversold. All of this can happen fast enough to make your head spin.

Jun 27, 2020

FINRA Will File Enforcement Actions for Improper Sales of ETFs and ETNs Throughout Florida and the United States!

The Financial Industry Regulatory Authority (FINRA) announced plans to file enforcement actions against certain brokerages in connection with unsuitable sales of leveraged and inverse leveraged exchange-traded funds (ETFs), as well as for failure to train their brokers who sell them (see Reuters article by Suzanne Barlyn and Jessica Toonkel entitled “FINRA to bring cases over leveraged, inverse ETFs”). The article cites former FINRA Enforcement Chief Bradley Bennett as the source of this information, and notes that he refused to identify the broker-dealers that FINRA plans to sue. Bennett reportedly told lawyers at a Practising Law Institute (PLI) seminar in New York that the enforcement actions will “make statements” about how broker-dealers should ensure that registered representatives are properly trained about these complex products and the types of customers for whom they may or may not be suitable.

Jun 26, 2020

Watch Out Inverse ETF and ETN United States and International Investors!

The SEC and FINRA are finally stepping up to regulate nontraditional ETFs and ETNs and to ensure that these complicated products are not sold to unsophisticated investors. Citigroup Global Markets Inc., Morgan Stanley, UBS Financial Services Inc. and Wells Fargo agreed to pay $9.1 million to settle allegations that they sold leveraged and inverse exchange-traded funds to clients who had no business investing in the complex instruments.

Jun 26, 2020

Wells Fargo Fined for Failing to Supervise Representative’s Excessive and Unsuitable Trading

Wells Fargo submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which they allegedly failed to supervise a registered representative who excessively and unsuitably traded in three trust accounts belonging to a senior customer in violation of NASD Rule 3010(a) and FINRA Rules 3110(a) and 2010. Between March 2012 and March 2016, a Wells Fargo registered representative placed more than 2,000 trades in three trust accounts belonging to an 88-year-old customer. According to the FINRA findings, Wells Fargo used a computer program to identify red flags of unsuitable trading using risk-based criteria and the written supervisory procedures required the Firm to conduct customer interviews to address these red flags. The findings stated the program flagged the accounts for high velocity 40 times in which Wells Fargo failed to address. As a result of the excessive trading, the customer paid at least $300,000 in commissions and other fees. Following its investigation, the Firm discharged the registered representative responsible for the accounts.

Jun 25, 2020

Watch Out Florida Fixed Income Investors—Exchange Traded Notes Are Dangerous!

Investor advocates are saying that more should be done to protect retail investors in Exchange-Traded Notes (ETNs). There is growing concern that with the rising popularity of ETNs, investors and financial advisers are getting into these products without fully understanding them or the risks involved. ETN’s are bank-issued debt securities. They were first brought to market six years ago to allow sophisticated investors to place bets on different parts of the market. Recently, however, retail investors have also started trading ETNs to gain access to certain market segments, such as those involving gold, silver, or natural gas. ETN offerings have grown in number over the past few years, with 212 ETNs now found on exchanges.

Jun 24, 2020

Watch Out Investors: FINRA Alerts Exchange Traded Note (ETN) Investors

The Financial Industry Regulatory Authority (FINRA), the self-regulatory arm of the U.S. securities brokerage industry, has issued an Investor Alert regarding the features and risks of exchange-traded notes. FINRA and the Securities and Exchange Commission have raised concerns about disclosures and sales practices involving exchange-traded notes, as well as other complex structured products. Former FINRA Enforcement Chief Brad Bennett said that FINRA will bring enforcement actions against firms for unsuitable recommendations of exchange-traded notes. FINRA issued Regulatory Notice 12-03 to provide broker-dealers with guidance on supervising the sale of complex products that are difficult for retail investors and brokers to understand. The FINRA alert warns that exchange-traded notes often have little or no performance history, their indexes and investment strategies can be quite complex, their returns can be volatile, and the price computed by the issuer can vary significantly from the price in the secondary market. Firms are required to ensure that their marketing materials are fair and include accurate disclosures of all material risks; that registered representatives are properly trained to understand the risks of exchange-traded notes; and that supervisors are able to determine whether or not the sales meet suitability requirements.

Jun 24, 2020

Former First Standard Financial Stockbroker Michael Leahy Barred for Misconduct

Michael Leahy of Red Bank, New Jersey submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which he has been barred for allegedly failing to reasonably supervise another representative in violation of FINRA Rules 3110 and 2010. In July 2017, Michael Leahy joined First Standard Financial General Securities Representative and General Securities Principal. According to FINRA, Michael Leahy failed to supervise a former registered representative with First Standard, who engaged in a pattern of unauthorized trading, used margin without authorization, recommended unsuitable transactions, and charged excessive commissions in dozens of customer accounts. The FINRA findings stated the Leahy was allegedly aware of the multiple red flags and failed to investigate or take action against the representatives misconduct. Due to Leahy’s failure to supervise, the representative’s misconduct continued until the New Jersey Bureau of Securities revoked the representative’s registration.

Jun 23, 2020

Investors Nationwide Beware – Exchange-Traded Notes Carry Unpleasant Surprises!

The Financial Industry Regulatory Authority (FINRA) has recently raised concerns about disclosure and sales practices involving Exchange Traded Notes (ETNs). Of primary concern is the number of clients not suited for the risks associated with ETNs, but who still were recommended ETNs by their brokers. As a result, FINRA has issued a regulatory notice to provide broker-dealers with guidance on how to oversee the sale of complex products such as ETNs that are difficult for retail investors and brokers to understand. Firms are now required to make sure that their marketing materials fairly disclose risks, and that supervisors and registered representatives are trained to understand the risks associated with ETNs. FINRA also warned that ETNs have little or no performance history, their investment indexes and investment strategies are complex, their returns have the potential to be volatile, and the price given by the issuer can vary significantly from the price on the secondary market.

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