Securities Lawyers Blog
A concentrated investment portfolio, a failure to diversify, or an investment with far more risk than the investor understood are common causes of large investment losses. The broker negligence attorneys at Gana Weinstein LLP help investors at firms such as Sutter Securities Incorporated determine whether their financial advisor breached the duty to recommend suitable investments and, when the advisor did, pursue recovery through FINRA arbitration.
Sutter Securities is a broker-dealer that provides investment banking and advisory services, including corporate valuations and fairness opinions, along with agency equity trade execution and an alternative trading system. Founded in California in 1992 and based in San Francisco, the firm was acquired in 2018 by Fintech Global Markets, later renamed Sutter Securities Group, and operates a subsidiary providing valuation and litigation support services.
Sutter Securities Incorporated – By the Numbers:
- CRD #: 30770
- Regulatory Events: 3
- Broker Employees: 34
Sutter Securities Incorporated – In the News:
FINRA v. Sutter Securities Incorporated (Case #2021071987902) – Between March 2020 and July 2021 (the relevant period), Respondent Sutter Securities Inc. (Sutter), acting through a former Sutter registered representative (Representative 1), recommended and effected 2,217 trades in two accounts belonging to a retired, 89-year-old customer (Customer 1). Those trades caused the customer to pay staggering and ruinous trading costs—in excess of $2.9 million. This amount includes commissions representing nearly 35 percent of the firm’s total commission revenue during this period. Those trades also resulted in annualized cost-to-equity ratios of 46 and 38 percent—meaning the accounts needed to appreciate by these percentages just to break even. Collectively, Customer 1 suffered $1.2 million in realized losses during the 17 months his accounts were open at Sutter. During the period that Regulation Best Interest was in effect, between June 30, 2020 and July 2021, the trades that Representative 1 recommended were excessive, and resulted in annualized cost-to-equity ratios of 45 percent and 52 percent. During this period, Customer 1’s accounts incurred approximately $2.5 million in trading costs and more than $1.8 million in realized losses. By excessively trading Customer 1’s accounts, Sutter willfully violated Reg BI and violated FINRA Rule 2010. In addition, throughout the life of Customer 1’s account, Sutter and Respondent Keith Charles Moore—a part owner of the firm who served as its Chief Executive Officer and Representative 1’s direct supervisor—failed to identify, or reasonably respond to red flags of potentially excessive trading in Customer 1’s accounts, including: (i) extraordinarily large trading volumes and realized losses; (ii) cost-to-equity ratios over 20 percent; (iii) turnover rates greater than six; (iv) a pattern of frequent in-and-out trading; and (v) persistent use of margin. Sutter and Moore failed to take reasonable actions to identify, respond to, and address these and other red flags. As a result, Sutter and Moore violated FINRA Rules 3110(a) and 2010. During the relevant period, Sutter failed to establish, maintain, and enforce a supervisory system, including written supervisory procedures (WSPs), reasonably designed to achieve compliance with the suitability requirements of FINRA Rule 2111 and, as of June 30, 2020, Reg BI’s Care Obligation regarding excessive trading. Sutter’s WSPs failed to provide reasonable guidance regarding how to detect, and respond to potentially excessive trading, and the firm in fact failed to implement reasonable supervisory practices to achieve these objectives. As a result, Sutter violated FINRA Rules 3110(a) and (b) and 2010. From June 30, 2020, through July 2021, Sutter failed to establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance with Reg BI’s Care Obligation regarding excessive trading.
FINRA v. Sutter Securities Incorporated (Case #2022075185901) – From January 2021 through December 2023 (the Relevant Period), Respondents Boustead Securities, LLC (Boustead) and Sutter Securities Incorporated (Sutter) violated anti-money laundering (AML), supervisory, recordkeeping, and other SEC or FINRA rules in connection with their jointly conducted investment banking businesses. Within the Relevant Period, the firms, which were commonly owned and controlled, acted as an underwriter or selling group member in approximately 30 public distributions of securities, including initial public offerings (IPOs) involving small, micro, and nano-capitalization issuers based in China or other foreign jurisdictions. The issuers in these offerings referred individuals to Boustead and Sutter to open brokerage accounts for the purpose of trading in the issuers’ securities. The referred individuals (issuer-referred customers) were often foreign nationals residing outside of the United States who never met or spoke in person with the firms’ representatives. The firms’ business model of underwriting public offerings for issuers located in China or other foreign jurisdictions and facilitating trading in those issuers’ low-priced securities for foreign issuer-referred customers posed risks to the firms including, among other things, that the brokerage accounts may be controlled by undisclosed persons or groups (i.e., nominee accounts) and that the trading in those accounts may be potentially manipulative or fraudulent. Neither firm, however, established or implemented a reasonably designed AML program tailored to the firms’ business activities and risks. Boustead and Sutter also failed to monitor for, detect, and investigate red flags that the accounts may be beneficially owned or controlled by nominees, both during the account opening process and after the firms opened the accounts. These red flags included nearly identical customer account profiles, customers with uncorroborated financial information, and investment amounts that were not commensurate with the customers’ reported occupations, incomes, or financial resources. Because the firms failed to monitor for, detect, or investigate these red flags, they failed to consider whether to file suspicious activity reports (SARs). Additionally, Boustead and Sutter failed to establish or implement AML policies and procedures, or conduct ongoing due diligence, to monitor for, detect, or investigate suspicious activity indicative of potentially manipulative or fraudulent trading. Because the firms failed to monitor for, detect, or investigate these red flags, they failed to consider whether to file SARs to report potentially suspicious transactions. At all relevant times, Respondent Keith Charles Moore (Moore) was the CEO at both firms responsible for supervising the business activities of Boustead and Sutter, and he was also the Anti-Money Laundering Compliance Officer (AMLCO) for both firms.
Wondering whether you can sue your financial advisor or Sutter Securities Incorporated? The investment loss attorneys at Gana Weinstein LLP can answer that question after a free review of your account statements. We welcome all inquiries.