Articles Posted in Brokerage Firms In The News

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

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

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.  Continue Reading

Investors Capital Corporation (Investors Capital) of Lynnfield, Massachusetts, submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) for allegedly failing to apply sales-charge discounts to certain customers’ eligible purchases of unit investment trusts and for failing to establish, maintain, and enforce a proper supervisory system with respect to certain registered representatives’ unsuitable recommendations of unit investment trusts (UITs).

FINRA found that Investors Capital, through some of its registered representatives, recommended unsuitable short-term trading of UITs without reasonable grounds for believing the recommendations were suitable for customers, resulting in customer losses of approximately $242,892.  FINRA also found that Investors Capital failed to apply sales charge discounts to approximately 1,995 customers’ purchases of UITs, resulting in excessive sales charges of $472,876.  The firm’s supervisory system allegedly failed to ensure the customers received appropriate sales charge discounts, relying solely on its representatives to ensure customers received the discounts.  Without admitting or denying FINRA’s findings, Investors Capital was censured, fined $250,000 and required to pay restitution of $841,532.97 to the affected customers.     Continue Reading

Ameriprise Financial Services, Inc. (Ameriprise) submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) for alleged supervisory failures in connection with wire transfers from customer brokerage accounts and the resulting conversion of over $370,000 by one of its registered representatives.

Ameriprise is headquartered in Minneapolis, Minnesota and employs nearly 14,000 registered representatives in approximately 3,800 branch offices.  FINRA found that from October 2011 to September 2013, a registered representative, working as an office manager, converted more than $370,000 from five Ameriprise customers.  The customers happened to also be the registered representative’s family members, including his mother, step-father, grandparents and domestic partner.  FINRA’s findings state that the Ameriprise employee’s conversion, which occurred via nine wire transfers, went undetected for two years by Ameriprise.  Continue Reading

Houston, Texas-based VALIC Financial Advisors, Inc. (VALIC) was hit with a $1.75 million fine by the Financial Industry Regulatory Authority (FINRA) for failing to prevent compensation conflicts.  VALIC is alleged to have incentivized its registered representatives to sell its own annuities and discouraged them from selling non-proprietary products.

FINRA found that from October 2011 to October 2014, VALIC failed to maintain a reasonable supervisory system to address the potential conflicts of interest created by its compensation policy, which incentivized its representatives for recommending that customers move funds from VALIC variable annuities to the firm’s fee-based platform or a VALIC fixed index annuity.  Further, FINRA found that VALIC made the compensation conflict worse by prohibiting its representatives from receiving compensation when moving customer funds from a VALIC variable annuity to a non-VALIC variable annuity, mutual fund or other non-VALIC product. Continue Reading