Securities Lawyers Blog
This article continues our prior post concerning The Financial Industry Regulatory Authority (FINRA) recent sanctions of brokerage firm WFG Investments, Inc. (WFG) alleging a host of supervisory failures from March 2007, through January 2014.
In one supervisory failure example involving suitability, FINRA found that between 2009, and 2013, a broker by the initials “MC” (1) traded with discretion in several of his customers’ accounts without their written authorization; and (2) also excessively traded in at least one of his customer’s accounts in light the customer’s investment objectives and risk tolerance. FINRA also alleged that many of the securities traded were also qualitatively unsuitable in light of the customers’ age, objectives, risk tolerance, and financial situation. In addition, several of the customer’s accounts were charged both commissions and management fees and this problem was not identified or corrected even after it was detected.
FINRA also alleged that MC used unapproved charts and provided consolidated statements to a customer without the firm’s knowledge or approval. Moreover, allegedly there were exception reports that highlighted the problem trading activity in several of these accounts that were simply not reviewed or not properly processed. In fact, FINRA found that one of the customers who complained about unsuitable activity in her accounts was not contacted by the firm until after she had complained despite the fact that her accounts had appeared on numerous exception reports. Similarly, FINRA found that broker SGD was also permitted by the WFG to engage in unsuitable trading in one of his customer’s accounts which included the recommendation and sale of numerous high risk equity and ETF purchases for a retired client with a conservative risk tolerance.
In another supervisory failure, FINRA alleged that between August 2012, and July 2013, WFG granted a blanket waiver to the sale of alternative investments by a broker referred to by the initials “SBD.” The broker promoted an investment strategy of holding a portfolio of ten to fifteen alternative investments, including REITs and private equity. FINRA found that even though the firm had supervisory procedures pertaining to the sale of alternative investments and required heightened supervision when concentration limits were exceeded the firm elected to implement a blanket waiver of its procedures regarding concentration limits for all of SBD’s customers. As a result, FINRA found that several of SBD’s customers invested more than 25% of their liquid net worth in various alternative investments, and some even invested more than 90% of their liquid net worth without proper supervision by the firm.
Investors who have suffered losses through their brokerage firm’s recommendations may be able recover their losses through securities arbitration. The attorneys at Gana Weinstein LLP are experienced in representing investors in cases of unsuitable investments and failure to supervise their representatives. Our consultations are free of charge and the firm is only compensated if you recover.