In a FINRA Office of Hearing Officers’ decision reported in September, 2015 (which is presently on appeal) De Pere, Wisconsin broker dealer KCD Financial, Inc. was censured and fined $115,000. The sanctions were based on findings that the firm permitted registered representatives in two branch offices to use false and misleading advertisements as a marketing tool for their securities business.
The findings stated that these registered representatives separately ran what was sometimes referred to as a certificate of deposit finder or locator service. The KCD Financial representatives regularly advertised Federal Deposit Insurance Corporation (FDIC)-insured CDs at a rate of return that was far above the market rate. No FDIC-insured CDs existed at the advertised rate of return, but the advertisements made it seem that these CDs existed.
The representatives used the advertisements to entice potential customers into their offices in order to sell securities and other financial products to them. However, the advertisements did not mention securities. The CD advertisements were not separate and apart from the representatives’ securities business, but rather, were a marketing tool for their securities business. Further, from the customers’ perspective, the CDs and securities were offered and sold by the same person from the same office as part of the same business. The OHO decision found that KCD Financial was aware of, or at least turned a blind eye to, the nature and function of the advertising.
The findings also stated that KCD Financial failed to appropriately supervise the activities of its registered representatives at a branch office, and permitted the representatives to offer and sell unregistered securities that were not exempt from registration. The findings also included that a settlement was reached regarding the charges relating to the supervision, review and retention of email, and is no longer at issue.
This matter has been appealed to the NAC and the sanctions are not in effect pending review.
KCD Financial registration and disciplinary history
In order to lawfully sell investments to the public, one must either be registered or exempt from registration. KCD Financial is registered with the SEC, one self regulatory organization and in 44 states and territories.
According to FINRA’s CRD disclosure report, KCD Financial has been the subject of three regulatory investigations.
The Law Office of David Liebrader practices exclusively in the field of investment loss recovery. For the past 23 years, we have dedicated our law practice to assisting investors who have been victims of investment fraud via fraudulent and unsuitable investment transactions. During that time we have recovered money for over one thousand individuals, pension plans, trusts and companies. The recoveries we have obtained via judgments, awards and settlements on behalf of our clients exceed $40,000,000.
When investors contact our firm they can expect prompt attention, and a detailed analysis of their issues. Typical claims that we are asked to review involve “unsuitability (where a financial advisor makes investment recommendations that are inconsistent with a customer’s investment objectives), claims for “churning” (where a broker enters into an excessive number of trades for the purpose of generating commissions), claims involving illiquid investments such as private placements (I.e., real estate investment trusts, limited partnerships, equipment leasing and oil and gas drilling programs) as well as claims for violations of state securities laws, which often provide investors remedies like attorney’s fees and interest, if they are successful on the claim.
Since a Supreme Court ruling in the 1980s, most investment related disputes between brokerage firms and their customers have been filed in an arbitration forum hosted by FINRA Dispute Resolution. FINRA, along with the SEC, serves as a securities industry “watchdog” and regulator. Most brokerage firms require their clients to sign binding arbitration agreements, mandating that any disputes between them be arbitrated at FINRA.
Investors pursuing claims at FINRA typically advance claims related to suitability. FINRA rules require that all registered representatives make suitable investment recommendations to their clients. Other claims are based on negligence or breach of fiduciary duty, while another category includes claims based on misrepresentations and fraud. Most claims filed with FINRA are resolved within 15 months, and oftentimes, the cases are resolved via settlement or mediation in under a year.
FINRA’s rules require that all investment recommendations made by licensed financial advisors be suitable in light of a customer’s needs, objectives and risk tolerance. In addition, all registered representatives are required to be properly supervised, with periodic inspections and reviews by qualified supervisors, whose job it is to vigorously investigate suspicions of wrongdoing (red flags).
If you suspect that you have been the victim of investment fraud, or had a financial advisor recommend unsuitable investments to you, call us today for a free, confidential consultation at (702) 380-3131.