Library - Law Offices of Robert Wayne Pearce

MSI Financial Services to Pay More Than $2.2 Million in Restitution for Mutual Fund Overcharges

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.

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.

Aug 14, 2017

Edward Jones Representative Fined for Failure to Disclose Beneficiary Designation

Steven Olejniczak, a former registered representative with Edward D. Jones & Co., L.P. (Edward Jones) was fined and suspended by the Financial Industry Regulatory Authority (FINRA) for allegedly failing to disclose that an elderly customer had designated him and his wife as account beneficiaries. According to FINRA, Steven Anthony Olejniczak, of Grimes, Iowa, was designated as the beneficiary of 90% of the assets in his elderly customer’s account. Firm rules prohibit registered representatives from being named as beneficiary by his/her own customer while continuing to service the account. Mr. Olejniczak failed to notify his member firm of his own beneficiary designation and the naming of his wife as beneficiary of the customer’s firm account and estate. Additionally, FINRA found that Mr. Olejniczak failed to disclose that his customer had executed a document that gave him medical power of attorney in the event the customer became incapacitated.

Aug 11, 2017

Commonwealth Financial Broker Suspended for Discretionary Trading in Deceased Customer’s Accounts

V. Cullen Kempson III, a/k/a Voigt C. Kempson, a stockbroker formerly employed by Commonwealth Financial Network, 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 unauthorized discretionary trades in his deceased customer’s accounts. Voigt Kempson, of Sparta, New Jersey, was found by FINRA to have effected 40 discretionary trades in the accounts of his deceased customer even though he was aware of his customer’s death. Although Mr. Kempson had been authorized to effect discretionary trades while the customer was alive, Mr. Kempson continued to trade in the customer’s accounts even after her death. Further, FINRA found that Mr. Kempson neglected to inform his member firm of the customer’s death.

Aug 7, 2017

WFG Investments Fined by FINRA for Failure to Supervise Unsuitable Trading

WFG Investments, Inc. has submitted a Letter of Acceptance, Waiver, and Consent (AWC) in which it has been fined $150,000 by the Financial Industry Regulatory Authority (FINRA) for failing to supervise its registered representative’s unsuitable trading despite numerous red flags. WFG Investments is headquartered in Dallas, Texas and currently has approximately 237 registered representatives and 118 branch offices. FINRA found that WFG Investments failed to appropriately supervise the sales practices of a registered representative who had engaged in unsuitable trading in his customers’ accounts by overconcentrating them in low-priced securities. For example, FINRA found that during 2012, the WFG representative’s account purchases were 66% low-priced securities. In 2013, FINRA’s findings state that the account purchases were 80% concentrated in these securities and/or illiquid and highly speculative private placement and REIT investments.

Aug 4, 2017

FINRA Fines and Suspends Former Raymond James Broker for Discretionary Trade Violations

William McWilliams, a registered representative formerly employed with Raymond James Financial Services, Inc. (Raymond James), 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 exercised discretion at least 28 times in eight customer accounts without the necessary prior written authorization. FINRA found that William Harrison McWilliams, of Columbia, Missouri, failed to obtain the necessary written authorization from his customers or his member firm when he exercised discretion in the accounts of eight customers. According to FINRA, Mr. McWilliams exercised discretionary trading authority in response to customer liquidation requests six times in four customers’ accounts without the requisite prior written authorization from customers and without the accounts accepted as discretionary by his member firm. Further, FINRA found that Mr. McWilliams exercised discretionary trading authority at least 22 times in four other customer accounts without discussing the trades with the customers on the day of the trades, which was required by the firm.

Aug 2, 2017

Summit Equities Fined for Variable Annuity Supervisory Failures

Summit Equities, Inc., submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which it was fined $325,000 for failing to adequately supervise its registered representatives’ recommendations and sales of multi-share-class variable annuities. Registered with FINRA since 1982 and headquartered in Parsippany, New Jersey, Summit Equities has approximately 132 registered representatives. FINRA found that from October 2011 to December 2015 (the relevant time period), Summit Equities sold 1,037 individual variable annuity contracts to its customers. Approximately 45% of those contracts were L-share contracts. FINRA found that Summit Equities failed to provide its registered representatives with proper training and guidance on suitability considerations for these variable annuities, which provide a shorter surrender period than B-share contracts, but have a higher fee in exchange for the increased liquidity. Without admitting or denying the FINRA findings, Summit Equities was censured and assessed a $325,000 fine.

Jul 31, 2017

Oppenheimer Broker Suspended for Unsuitable ETF Recommendations

Edward McFarlane, a registered representative formerly employed with Oppenheimer & Co. Oppenheimer), 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 recommended and effected unsuitable ETF recommendations in his customer’s account, resulting in losses to his customer of approximately $48,524.79. Edward Thomas McFarlane, of Glenside, Pennsylvania, allegedly recommended and effected approximately 169 transactions involving inverse, leveraged, and inverse-leveraged exchange-traded funds (ETFs). FINRA found that Mr. McFarlane recommended that the non-traditional ETFs be held in his customer’s account for as long as 470 days, with an average holding time of 40 days. The ETFs recommended by Mr. McFarlane were intended to be short-term trading vehicles and not meant to be long-term investments.

Jul 28, 2017

INVEST Financial Corporation Broker Suspended for Unsuitable Mutual Fund Trading

Stephen J. Landa, of Easton, Connecticut, submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which he was fined $5,000 and suspended for two months for recommending and engaging in a short-term mutual fund trading strategy in the accounts of retirees on a fixed income and conservative investment goals. FINRA found that while employed with INVEST Financial Corporation, Stephen Landa engaged in an unsuitable short-term mutual fund trading strategy in two customers’ accounts. The customers were 60 years old at the time, retired, and living on a fixed income. Further, the customers had conservative investment objectives and moderate risk tolerances. Notwithstanding their conservative investment profiles, FINRA found that Mr. Landa recommended they purchase mutual fund shares and shortly thereafter (on average, just six months), he recommended they sell the shares. Consequently, the customers suffered losses of $18,156.53.

Jul 26, 2017

Former Gold Coast Securities Broker Named in FINRA Complaint Alleging Churning

Joseph Farah, a former registered representative with Gold Coast Securities, was named a Respondent in a Financial Industry Regulatory Authority (FINRA) complaint for allegedly engaging in a fraudulent churning scheme, causing his customer to suffer substantial losses. Joseph C. Farah, of Hacienda Heights, California, is alleged by FINRA to have acted with intent to defraud and reckless disregard for his customer’s interests by churning his customer’s account. According to FINRA, Mr. Farah allegedly executed more than 600 trades in his customer’s account, causing the account to diminish in value by over 25%. The FINRA complaint alleges that Mr. Farah failed to inform his member firm that he had discretionary authority over the customer’s account, which Mr. Farah suggested she open at TD Ameritrade. FINRA’s complaint notes that the customer’s annual income was listed as just $25,000 – $49,999, which was correct, but her investment experience was incorrectly described as 1-2 years of experience. FINRA found that she actually had no investing experience.

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