Articles Posted in Brokerage Firms In The News

Published on:

FSC Securities Corporation has been censured and fined $100,000 and ordered to pay restitution to affected customers of over $492,485.33 for failing to supervise the unsuitable sales of leveraged, inverse and inverse-leveraged exchange-traded funds (non-traditional ETFs).

The Financial Industry Regulatory Authority (FINRA) found that FSC Securities, which is headquartered in Atlanta, Georgia, failed to establish and maintain an adequate supervisory system to ensure the suitability of its sales of non-traditional ETFs.  According to FINRA, FSC Securities executed approximately 6,500 purchases of the non-traditional ETFs, which were worth approximately $92 million and generated roughly $603,000 in commissions.   Continue reading →

Published on:

Trident Partners Ltd. has submitted a Letter of Acceptance, Waiver, and Consent (AWC) in which it has been censured and fined $50,000 by the Financial Industry Regulatory Authority (FINRA) for failing to adequately supervise the sales and suitability of steepeners, a complex, structured product.

Trident Partners, headquartered in Woodbury, New York, was found by FINRA to have failed to establish, maintain, and enforce a supervisory system to ensure that recommendations for its sale of steepeners were suitable.  Steepeners are complex, structured products that are typically longer-term notes and certificates of deposit with maturities spanning from 10-30 years.  They are typically callable by the issuers after a short, pre-specified time.  They pay higher interest rates, but if the steepener is not called after a year, the rates can drop to as low as zero, earning no returns for the remainder of the term.  FINRA found that during the relevant period, steepeners were a significant part of Trident Partners’ business, with approximately 1,600 transactions and accounting for at least 10% of commissions generated.  Continue reading →

Published on:

Roger Zullo, a former registered representative with LPL Financial LLC, has been barred by the Financial Industry Regulatory Authority (FINRA) for refusing to produce information and documents requested by FINRA in connection with an investigation into allegations of fraud, falsifying client suitability profiles and unsuitable variable annuity sales.  FINRA’s investigation arose from a complaint, and subsequent Consent Order, by the Massachusetts Securities Division against Mr. Zullo and LPL Financial.

FINRA began an investigation in January 2017 following allegations made in the complaint filed by the Massachusetts Securities Division.  That complaint alleged that Mr. Zullo, of Boston, Massachusetts, “fabricated the financial suitability profiles of numerous LPL clients, selling them scores of large, illiquid, unsuitable, high-commission variable annuities, at substantial upfront profits to himself and LPL.”  Further, the complaint alleged that Mr. Zullo prematurely switched out his clients’ existing annuities (which were also sold by Mr. Zullo), caused unnecessary surrender charges, and disregarded his clients’ investment profiles at an enormous profit to himself and LPL. The complaint states, “Over the course of three years, Zullo and LPL received more than $1,825,000 in variable annuity commissions alone; of this amount, more than $1,791,000, or 98%, represented commissions from the sale of the same annuity product, the Polaris Platinum III (B Shares) variable annuity.” Continue reading →

Published on:

The Financial Industry Regulatory Authority (FINRA) announced today that it ordered Morgan Stanley Smith Barney LLC (Morgan Stanley) to pay $13 million in fines and restitution for failing to supervise the sales of unit investment trusts (UITs).

FINRA found that from January 2012 through June 2015, hundreds of Morgan Stanley brokers executed short-term UIT rollovers in thousands of customer accounts.  Further, FINRA found that Morgan Stanley failed to adequately supervise its representatives’ sales by failing to provide sufficient guidance or training to detect unsuitable short-term UIT trading.  Continue reading →

Published on:

Cetera Advisors LLC has agreed to pay more than $628,000 in restitution to customers who were overcharged in certain mutual fund purchases.  According to the Financial Industry Regulatory Authority (FINRA), between July 1, 2009 and January 1, 2017, Cetera Advisors disadvantaged certain retirement plan and charitable organization customers that were eligible to purchase Class A shares of certain mutual funds without a front-end sales charge.  The customers were instead sold Class A shares with a front-end sales charge or Class B or C shares with back-end sales charges and higher ongoing fees and expenses.

Cetera Advisors is headquartered in Denver, Colorado, with approximately 1,788 registered representatives and 961 branch offices.  According to the Letter of Acceptance, Waiver and Consent (AWC) submitted to FINRA, Cetera Advisors failed to reasonably supervise the application of the sales charge waivers to the eligible mutual fund sales, relying on its financial advisors to determine the applicability of sales charge waivers.  Further, Cetera Advisors allegedly failed to adequately notify and train its financial advisors regarding the availability of mutual fund sales charge waivers for eligible customers.  Without admitting or denying the findings, Cetera Advisors was censured, required to provide a remediation plan to FINRA, and agreed to pay restitution to eligible customers who were overcharged an estimated $628,040.  Continue reading →

Published on:

MSI Financial Services, Inc. has agreed to pay more than $2.2 million in restitution to customers who were overcharged in certain mutual fund purchases.  According to the Financial Industry Regulatory Authority (FINRA), between July 1, 2009 and March 27, 2017, MSI Financial Services disadvantaged certain retirement plan and charitable organization customers that were eligible to purchase Class A shares of certain mutual funds without a front-end sales charge.  The customers were instead sold Class A shares with a front-end sales charge or Class B or C shares with back-end sales charges and higher ongoing fees and expenses.

MSI Financial Services is headquartered in Springfield, Massachusetts, with more than 5,300 registered representatives and 700 branch offices. According to the Letter of Acceptance, Waiver and Consent (AWC) submitted to FINRA, MSI Financial Services failed to reasonably supervise the application of the sales charge waivers to the eligible mutual fund sales, relying on its financial advisors to determine the applicability of sales charge waivers.  Further, MSI Financial Services allegedly failed to adequately notify and train its financial advisors regarding the availability of mutual fund sales charge waivers for eligible customers.  Without admitting or denying the findings, MSI Financial Services was censured, required to provide a remediation plan to FINRA, and agreed to pay restitution to eligible customers who were overcharged an estimated $2,200,000.  Continue reading →

Published on:

Cetera Advisor Networks has agreed to pay more than $1.9 million in restitution to customers who were overcharged in certain mutual fund purchases.  According to the Financial Industry Regulatory Authority (FINRA), between July 1, 2009 and January 1, 2017, Cetera Advisor Networks disadvantaged certain retirement plan and charitable organization customers that were eligible to purchase Class A shares of certain mutual funds without a front-end sales charge.  The customers were instead sold Class A shares with a front-end sales charge or Class B or C shares with back-end sales charges and higher ongoing fees and expenses.  Continue reading →

Published on:

A FINRA hearing panel has expelled Red River Securities, LLC and barred its CEO, Brian Keith Hardwick, for fraudulent sales in five oil and gas offerings.  They have also been ordered to pay $24.6 million in restitution to investors.  According to FINRA, over the course of four years, Red River Securities and Brian Hardwick made misrepresentations and omissions in connection with the sales of interests in oil and gas joint ventures issued by Regal Energy, LLC, a close affiliate of Red River Securities.

FINRA found that Red River Securities and Brian Hardwick fraudulently misrepresented and omitted facts relating to the risky offerings.  For example, they allegedly misrepresented the amount of income distributed to investors, failed to disclose material facts regarding the risk involved, and omitted information about the fees involved.  The FINRA panel referred to this aforementioned misconduct as egregious and noted the “extent of the respondents’ monetary gain,” in which investors received total distributions less than $50,000 from the more than $25 million they invested in the offerings. Continue reading →

Published on:

Berthel, Fisher & Co. Financial Services, Inc. (Berthel Fisher) and one of its brokers, Jeffrey Dragon, were named in a Financial Industry Regulatory Authority (FINRA) complaint alleging that the firm and Mr. Dragon profited at customers’ expense due to unsuitable short-term trading of unit investment trusts (UITs).

According to the complaint, while registered with the Burlington, Massachusetts office of Berthel Fisher, Jeffrey Dragon recommended to numerous customers – many who were seniors and/or unsophisticated investors – that they liquidate UIT positions held for just a few months (allegedly purchased upon Mr. Dragon’s recommendations), and use the proceeds to buy other UITs.  Further, the complaint goes on to allege that Mr. Dragon’s recommendations were unsuitable because his recommendations prevented his customers from qualifying for sales-charge discounts.  This strategy increased profits for both Mr. Dragon and Berthel Fisher. Continue reading →

Published on:

MML Investors Services, LLC (MML Investors) has agreed to pay more than $1.8 million in restitution to customers who were overcharged in certain mutual fund purchases.  According to the Financial Industry Regulatory Authority (FINRA), between July 1, 1009 and September 20, 2016, MML Investors disadvantaged certain retirement plan and charitable organization customers that were eligible to purchase Class A shares of certain mutual funds without a front-end sales charge.  The customers were instead sold Class A shares with a front-end sales charge or Class B or C shares with back-end sales charges and higher ongoing fees and expenses.

MML Investors has more than 1,100 branch offices and more than 5,300 registered representatives.  According to the Letter of Acceptance, Waiver and Consent (AWC) submitted to FINRA, MML Investors failed to reasonably supervise the application of the sales charge waivers to the eligible mutual fund sales, relying on its financial advisors to determine the applicability of sales charge waivers.  Further, MML Investors allegedly failed to adequately notify and train its financial advisors regarding the availability of mutual fund sales charge waivers for eligible customers.  Without admitting or denying the findings, MML Investors consented to the sanctions, was censured, and agreed to pay restitution to eligible customers who were overcharged an estimated $1,864,167.77.  This amount includes the approximately $1.5 million in mutual fund overcharges plus interest. Continue reading →