On July 13, 2021, NEXT Financial entered into a regulatory settlement for excessive trading in which NEXT was censured, fined $750,000 and required to certify that it has implemented supervisory systems and procedures reasonably designed to address the issue.
The trading issues stem from unsuitable short-term trading of mutual funds and municipal bonds in customer accounts and over-concentration of customer accounts in Puerto Rican municipal bonds. Without admitting or denying the findings, the NEXT consented to the sanctions and to the entry of findings that it failed to establish, maintain and enforce a supervisory system, including written supervisory procedures, reasonably designed to detect and prevent unsuitable short-term trading of mutual funds and municipal bonds in customer accounts and over-concentration of customer accounts in Puerto Rican bonds.
Rules concerning suitability and excessive trading are designed to protect investors from excessive risk which an investor is not prepared or willing to take. The motivation for such unsuitable investments is generally a heightened commission to the broker. In the case of turnover of mutual funds, the costs and commissions incurred from sale and repurchase are much higher than the investor can reasonably re-earn if even the account is turned-over only a few times.
Investors of Douglas Simanski should call 303-300-5022 for a free and confidential consultation with a private attorney.
Federal regulators allege that Douglas Simanski raised more than $3.9 million from approximately 27 of his brokerage customers and investment advisory clients by telling them that he would invest their money in either a “tax-free” fixed rate investment, a rental car company, or one of two coal mining companies in which Simanski claimed to have an ownership interest.
The investors were largely in the Altoona, PA area. Most of the investors were elderly.
The Securities and Exchange Commission (SEC) filed a civil action in the United States District Court for Western Pennsylvania on November 2, 2018. The complaint describes the fraudulent scheme of Simanski and seeks civil penalties and disgorgement.
As stated in the SEC complaint, “Simanski convinced some of his most trusting and vulnerable clients, many of them retired or elderly, to invest their money while knowing the investments were not legitimate, that he would make virtually no securities investments on their behalf, and would instead use their money for personal expenses or to repay other investors.”
Simanski placed investor funds in brokerage and bank accounts that Simanski opened in his wife’s name. He would then use the life savings of his investors for his own personal needs.
The record of Simanski shows that his employers ultimately discovered the wrongdoing after investors brought the matter to the attention of regulators.