Investors with H. Beck may have grounds for recovery for investment losses in ETFs and other investments.
H. Beck recently consented to a settlement with regulators. The settlement stated that from at least July 2008 until June 2013, H. Beck failed to properly supervise the sale of nontraditional ETFs and failed to properly supervise the recommendations made by its financial advisors. As a result, H. Beck violated NASD Rules 2310, 3010(a) through (b), and 2110, and FINRA Rules 2111, 3110(a)-(b), and 2010.
Between 2008 and 2011, H. Beck’s financial advisor James Dresselaers recommended to the Firm’s customer, EB, investments in several nontraditional exchange-traded funds (“ETFs”) and stocks issued by companies in the metals and mining sector. These recommendations were unsuitable for EB, a professional athlete with no investment experience, a moderate risk tolerance, and an investment objective of long-term growth. EB suffered losses of more than $1.1 million on these investments.
NASD Rule 3010(a)-(b) and FINRA Rule 3110(a)-(b) require every investment brokerage to establish and maintain a system and procedures to supervise the activities of its financial advisors that is reasonably designed to achieve compliance with securities laws and regulations and applicable NASD/FINRA rules.
FINRA rules require that financial advisors only recommend investments to suitable investors. So if an investment poses too much risk, or possesses other characteristics that are inconsistent with the wants and needs of the investor, it is a violation to recommend that investment to such an investor. This is commonly referred to as a “suitability” violation.
This is not the first time H. Beck has been penalized by regulators over non-traditional investments. In March 2015, H. Beck was censured and fined $425,000 for failing to properly supervise the sale of unit investment trusts (UITs), failing to properly supervise the preparation of account reports sent to investors, and failing to enforce its own written supervisory procedures relating to financial advisors’ outside email accounts, which is a significant protection against fraud. Dresselaers also has a history of customer disputes. This is concerning since Dresselaers is listed as the top executive at H. Beck.
Such regulatory findings and prior disputes evidence wide-spread supervisory problems at H. Beck and support private claims by investors.