Tag Archives: suitability

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.

David B. Tysk of Ameriprise Investment Loss

If you suffered investment loss with David B. Tysk please call 1-866-817-0201 for a free consultation.

David Tysk, financial advisor for Ameriprise in Eden Prairie, MN, was fined $50,000 and
suspended from association with any FINRA member in any capacity for one year. The
Invest photo 2NAC affirmed the findings in the OHO decision and increased the sanctions. The sanctions
were based on findings that Tysk altered computer notes of customer contacts after the
customer complained about the suitability of a recommendation.

The findings stated that Tysk knew or should have known the importance of customer-related notes in the event of complaints. Tysk’s concealed alterations of his notes did not comply with the clear import of the document-retention policies in his member firm’s code of conduct. Tysk failed toinform the firm of the alterations when he provided a copy of the notes to be produced in discovery during an arbitration proceeding.

The customer became suspicious of the notes and requested further discovery to determine whether the notes had been altered after he lodged his complaint with the firm. Tysk and his firm opposed the requests. In a meeting to prepare for the arbitration hearing, Tysk finally disclosed to the firm that he had altered the notes. At the conclusion of the arbitration hearing, the firm and Tysk were sanctioned for violating arbitration discovery rules.

A copy of the NAC decision can be found at the following link.