suitablility

The Financial Industry Regulatory Authority (FINRA) in an acceptance, waiver, and consent action (AWC) sanctioned Newbridge Securities Corporation (Newbridge) concerning allegations that the firm violated a host of sales obligations to customers that resulted in unfair trading practices.

FINRA found that in ten transactions, Newbridge sold corporate bonds to customers and failed to sell such bonds at a price that was fair taking into consideration all relevant circumstances such as the market conditions for the bonds at the time of the transaction and the expense involved. FINRA also alleged in another 10 transactions for a customer the firm failed to use reasonable diligence to ascertain the best market price and failed to buy or sell in such market so that the price to its customer was as favorable as possible at the time of the transaction. Next, FINRA found a total of at least 50 instances where the firm failed to execute orders fully and promptly.

Further, FINRA alleged that Newbridge executed 32 short sale orders but failed to mark the orders as being sold short. As a result, FINRA found that on 13 occasions the firm effected short sales in an equity security for its own account without borrowing the security or having reasonable grounds to believe that the security could be borrowed so that it could be delivered on the date delivery is due. FINRA also found that the firm, on 63 occasions, provided written notification to customers that failed to disclose information or disclosed inaccurate information. The information that was inaccurate included the correct trade price, the correct execution price(s), the price was exclusive of any commission equivalent, failed to disclose or to accurately disclose the compensation amount(s) charged to the customer, and/or inaccurately disclosed the firm’s compensation type.

As reported by InvestmentNews, A Financial Industry Regulatory Authority (FINRA) official recently expressed concern over the sale of variable annuities as the products continue to evolve and become more complex. Carlo di Florio, chief risk officer and head of strategy at FINRA was quoted as stating that variable annuities are now taking on features that resemble complex structured products. Structured products typically have features such as caps that limit returns during market rallies and floors that limit losses during market slumps. Now these features are appearing in variable annuity products. Variable annuities are already extremely complex products that are not suitable for all investors. Adding yet an additional level of complexity only heightens concerns that investors must understand what they are buying when they are recommended these vehicles.

As a background variable annuities are complex financial and insurance products. Recently the Securities and Exchange Commission (SEC) released a publication entitled: Variable Annuities: What You Should Know. The SEC encouraged investors considering a purchase of a variable annuity to “ask your insurance agent, broker, financial planner, or other financial professional lots of questions about whether a variable annuity is right for you.”

A variable annuity is a contract an investor makes with an insurance company where the insurer agrees to make periodic payments to you. A variable annuity may be purchased either in a single payment or a series of payments over time. In the annuity account the investor chooses investments and the value of the annuity “varies” over time depending on the performance of the investments chosen. The investment options for variable annuities are generally mutual funds.

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Newbridge Securities Corporation Sanctioned By FINRA Over Sales Practices

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