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

Aug 18, 2017

Cetera Advisor Networks to Pay More Than $1.9 Million in Restitution for Mutual Fund Overcharges

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.

May 10, 2017

Red River Securities and CEO Expelled/Barred by FINRA for Fraudulent Oil and Gas Offerings

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.

Feb 3, 2017

MML Investors to Pay More Than $1.8 Million in Restitution for Mutual Fund Overcharges

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.

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.

Jan 27, 2017

Investors Capital Corp. Fined for Failing to Apply Sales-Charge Discounts to UIT Customers

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.

Dec 7, 2016

Ameriprise Financial Fined $850,000 for Wire Transfer Supervisory Failures

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.

Dec 1, 2016

Merrill Lynch Hit with $7 Million Fine for Failing to Supervise Securities-Backed Leveraged Accounts

The Financial Industry Regulatory Authority (FINRA) has hit Merrill Lynch, Pierce, Fenner & Smith, Inc. (Merrill Lynch) with a fine of more than $7 million for failing to properly supervise its customers’ use of leverage in loan management accounts and for improper supervision regarding unsuitable and highly overconcentrated accounts invested in Puerto Rican municipal bonds and closed-end bond funds. Without admitting or denying the charges, Merrill Lynch consented to FINRA’s findings that it failed to adequately educate its representatives about its loan management accounts (LMAs) or train them on the differences between purpose and non-purpose LMAs. LMAs are lines of credit that enable customers to borrow money from, in this case, Bank of America (the owner of Merrill Lynch) using the securities in their accounts as collateral. FINRA notes that Merrill Lynch brokers earned compensation if the customers used the line of credit. Merrill Lynch must pay $6.25 million for its failure to supervise these LMAs.

Nov 29, 2016

VALIC Financial Hit with $1.75 Million Fine for Compensation Conflicts

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.

Nov 25, 2016

FTB Advisors Fined for Variable Annuity Supervisory Failures

FTB Advisors, Inc., headquartered in Memphis, TN, submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) for failing to adequately supervise the sales of variable annuities, specifically L-share variable annuities. Registered with FINRA since 1986, FTB Advisors currently has 355 associated persons and 82 branch offices. FINRA found that from January 2013 to December 2014, FTB Advisors failed to establish, maintain, and enforce an adequate supervisory system to identify red flags related to the sale of L-share variable annuities. Further, FINRA found that FTB Advisors failed to provide its registered representatives with proper training and guidance on suitability considerations for these variable annuities. According to FINRA, the L-share annuities are a complex investment product that is only suitable for a narrow class of investors and that FTB Advisors allegedly failed to provide its registered representatives with appropriate guidance to discern this class of investor.

Nov 23, 2016

Kestra Investment Services Fined for Variable Annuity Supervisory Failures

Kestra Investment Services, Inc., headquartered in Austin, Texas, submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) for failing to adequately supervise the sales of variable annuities, specifically L-share variable annuities. Registered with FINRA since 1997, Kestra Investment Services currently has 1,845 registered representatives and 639 branch offices. FINRA found that from October 1, 2013 to June 30, 2014, Kestra Investment Services failed to establish, maintain, and enforce an adequate supervisory system to identify red flags related to the sale of L-share variable annuities. Further, FINRA found that Kestra Investment Services failed to provide its registered representatives with proper training and guidance on suitability considerations for these variable annuities. According to FINRA, the L-share annuities are a complex investment product that is only suitable for a narrow class of investors and that Kestra Investment Services allegedly failed to provide its registered representatives with appropriate guidance to discern this class of investor.