Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Raymond Smith (Smith), currently associated with Smith, Brown & Groover, Inc., has at least one disclosable event. These events include one regulatory, alleging that Smith recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on December 11, 2024.
On November 6, 2024, Respondent and Smith, Brown & Groover, Inc. (‘SBG’), entered into an Acceptance, Waiver and Consent (‘AWC’) with FINRA wherein, without admitting or denying any findings, Respondent consented to findings that, between July 2014 and February 2018, Respondent and SBG recommended a trading strategy, developed by Respondent, to 350 retail customers, 260 of whom were Respondent’s customers, without fully understanding the features and risks of the highly risky and complex strategy or the exchange-traded note (ETN) that the strategy primarily invested in, and failed to reasonably supervise the suitability of the trading strategy by failing, among other things, to establish procedures for, or evaluate, the reasonable-basis suitability of products like the ETN or over-concentration in such products that would create a risk of loss inconsistent with customers’ investment profiles. According to the AWC’s findings, Respondent and SBG did not have a reasonable basis to recommend the trading strategy to any customer because contrary to guidance in the ETN’s disclosure documents, Respondent and SBG invested customers in the ETN for an extended period, an average of 72 days, including through periods of high volatility; Respondent and SBG conducted flawed testing of the trading strategy that relied on incomplete data and overestimated potential returns; and, in early 2018, customer accounts participating in the trading strategy were fully invested in the ETN when a surge in market volatility caused the ETN to drop in price and the issuer to call the ETN, resulting in the holders of the ETN, including the firm’s customers, suffering near total losses on their investments.