Tag Archives: ETF

Losses with First Financial Equity (FFEC)

If you have suffered investment losses with First Financial Equity Corp. (“FFEC”) please call for a free consultation with an attorney at 1-866-817-0201.  Recent actions of FINRA, the financial industry regulator, indicate that investors may have been harmed by the actions of this firm.

FFEC and its chief compliance officer entered into a settlement with FINRA regulators  on March 8, 2017 concerning the lapses in supervision.  The alleged lapses allowed a variety of different fraudulent activity to occur throughout FFEC and in particular the Scottsdale, Arizona branch.  FINRA asserted that the chief supervisor of FFEC, the chief compliance officer, had not adequately supervised and that the firm did not have adequate supervisory procedures.

The most obvious result of the lack of supervision is the 26 customer complaints of broker John Schooler.  These complaints, many of which evolved into arbitration lawsuits, involved his inappropriate trades in oil & gas investments and TIC investments.

One issue alleged to be a result of the inadequate supervision is the sale of unsuitable ETFs.  Unsuitable securities are those which are not consistent with the wants and needs of an investor.  Usually, an investment is unsuitable if it puts at risk funds not earmarked for risk, or otherwise is inconsistent with who the client is as an investor.

In the case of FFEC, its brokers recommended and invested its customers in aggressive ETFs, including leveraged and inverse ETFs.  Such investments are known to be high risk, yet the brokers recommended the investments to individuals who did not express a desire for high risk investments.  Worse, many of these investments were purchased by the FFEC brokers for accounts where the brokers were given discretion and not given the required supervisory review.

To ensure suitability, FFEC brokers were required to obtain sufficient information about their investors to evaluate the investments that would be suitable.  The settlement states that this was not done.

Another issue alleged to have been caused by the lack of supervision is churning/excessive trading.  This occurs any time trades are made which the costs and fees are of an amount that the trades benefit the adviser more than the investor.

Losses with Matthew David Niederbaumer

Please call if you suffered losses with Matthew David Niederbaumer of Huron, South Dakota and employed by Thrivent Investment Management.

Mr. Niederbaumer submitted an AWC, a settlement agreement where a securities broker neither admits but cannot deny fault, in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for 10 business days.

Without admitting or denying the findings, Niederbaumer consented to the sanctions and to the entry of findings that he exercised discretion in executing transactions in connection with the sale and purchase of exchange-traded notes and funds in five of his customer’s accounts. The findings stated that while the customers consented to the transactions, Niederbaumer did not obtain the customers’ prior written authorization to exercise discretion in the accounts, and his member firm did not approve the accounts for discretionary trading.

Part of the concern in this matter is the fact that the trades involved exchange traded notes (ETN).  ETN investments carry a high commission and are high risk.  The possibility for abuse and improper intent is much more likely when such trades result in a commission higher than normal, and the chance that a customer would reject a recommended investment with such a high commission if consulted is greater.

The record of Mr. Niederbaumer’s compiled by FINRA can be found at the following link.

First Financial Equity Corp. Losses

Please call for a free consultation with an attorney if you suffered losses First Financial Equity Corp., particularly if you suffered losses in ETF or annuity investments.

First Financial Equity, a securities brokerage firm headquartered in Scottsdale, Arizona, as identified by FINRA in February 2017, entered in a regulatory settlement with FINRA regulators concerning allegations that financial advisers were receiving excessive commissions and selling unsuitable ETF investments and annuities.  The suit also revealed that systemic problems existed in the supervising of the advisers that would prevent such violations.

A FFEC broker who typifies the problems at FFEC is John Schooler.  This FFEC broker has 26 customer complaints.  Such complaints generally evolve into arbitration lawsuits against the firm.  The complaints against Schooler involve TIC, oil/gas and other inherently aggressive investments.

Under the terms of the Offer of Settlement with FINRA, the firm consented to, without
admitting or denying the same, the entry of the following findings. The findings
stated that First Financial Equity failed to establish, maintain, and enforce an adequate supervisory system, including written procedures, designed to ensure that the firm’s sales of leveraged and inverse ETFs (nontraditional ETFs) complied with applicable securities laws, and
NASD and FINRA rules.

The findings also stated that First Financial Equity failed to establish, maintain,
and enforce an adequate supervisory system and written procedures related to the sale
of multi-share class variable annuities and to maintain records supporting customer
suitability determinations with respect to variable annuity purchases.

Leveraged and inverse ETF are a high risk investment that pays advisers a high commission.  This creates a problem in that it provides motivation for advisers to recommend such investments to investors not seeking high risk.  Such suitability violations are in violation of FINRA rules in addition to the anti-fraud provision of federal and most state securities laws.

 

The firm failed to provide sufficient training to its registered representatives and principals on the sale and supervision of multi-share class variable annuities. The findings also included that the firm failed to implement a reasonable supervisory system and procedures to supervise variable annuity exchanges.

Morgan Stanley ETF Losses

If you have suffered losses with an ETF purchased through Morgan Stanley please call 1-866-817-0201 for a free and confidential consultation with a private attorney concerning your rights. We have reason to believe that Morgan Stanley engaged in systematic wrongdoing in the sale of certain ETFs based upon recent findings of the The Securities and Exchange Commission.

The SEC announced on February 14, 2017 that it has settled with Morgan Stanley for $8 million for inappropriate sales of complex exchange traded funds to advice clients.  More importantly, Morgan Stanley admitted to wrongdoing.

Morgan Stanley failed to obtain a signed client disclosure notice, which stated that single inverse ETFs were typically unsuitable for investors planning to hold them longer than one trading session unless used as part of a trading or hedging strategy.  This is important because the number of clients this impacted number in the hundreds.

The investment recommendations were also unsuitable, in violation of the regulatory duties that Morgan Stanley owes its investors.  Morgan Stanley solicited clients to purchase single inverse ETFs in retirement and other accounts, the securities were held long-term, and many of the clients experienced losses.

The SEC’s order further finds that Morgan Stanley failed to follow through on another key policy and procedure requiring a supervisor to conduct risk reviews to evaluate the suitability of inverse ETFs for each advisory client.  Among other compliance failures, Morgan Stanley did not monitor the single-inverse ETF positions on an ongoing basis and did not ensure that certain financial advisers completed single inverse ETF training.

Morgan Stanley also owes a duty to the investors to follow its own internal regulations.  The SEC’s order finds that Morgan Stanley did not adequately implement its policies and procedures to ensure that clients understood the risks involved with purchasing inverse ETFs.

“Morgan Stanley recommended securities with unique risks and failed to follow its policies and procedures to ensure they were suitable for all clients,” said Antonia Chion, Associate Director of the SEC Enforcement Division.

UBS Investor Loss Recovery

UBSIf you are an investor with UBS suffering losses in investments made between 2011 and 2014 you may be entitled to a recovery.  Please call 1-866-817-0201 for a free consultation.

As reported by Rueters, UBS Group AG has agreed to pay more than $15 million to settle U.S. Securities and Exchange Commission (SEC) charges that its failure to properly train brokers led to customers buying hundreds of millions of dollars of unsuitable securities.

The SEC said on Wednesday that UBS from 2011 to 2014 sold about $548 million of “reverse convertible notes,” derivatives tied to individual stocks, to more than 8,700 retail customers who were relatively inexperienced and unsophisticated.

These notes, with mouthfuls of names as Trigger Phoenix Autocall Optimization Securities and Airbag Yield Optimization Securities, were sold to people of modest means, often with low risk tolerances, and included some retirees, the SEC said.

“UBS dropped the ball,” SEC enforcement chief Andrew Ceresney said in a statement.

Gregg Rosenberg, a UBS spokesman, in a statement said the Swiss bank was pleased to settle. It did not admit wrongdoing.

UBS’s payout includes a $6 million civil fine, $8.23 million of improper gains and about $798,000 of interest.

The case is part of a years-long crackdown by the SEC, the Financial Industry Regulatory Authority (FINRA) and other regulators to stop banks and brokerages from selling products that retail and even professional customers may not want, need or understand.

According to the SEC, UBS’s notes were designed to offer attractive yields with a lessened risk of loss.

But Ceresney said on a conference call that UBS’s training focused on describing the “potential upside” from the various products, not their volatility.