FINRA fines Sterne Agee for leveraged ETF Sales

In November, 2015, the Financial Industry Regulatory Authority (“FINRA”) announced that Sterne Agee Financial Services, Inc. of Birmingham, Alabama) submitted a letter of Acceptance, Waiver and Consent in which the firm was censured and fined $25,000.

Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that Sterne Agee failed to enforce its written supervisory procedures prohibiting solicitation of inverse or leveraged exchange-traded funds (ETFs). The findings stated that the firm maintained written supervisory procedures that prohibited its registered representatives from soliciting transactions in inverse or leveraged ETFs. A registered representative solicited transactions in leveraged and inverse ETFs in contravention of the firm’s WSPs and mismarked all of the order tickets as “unsolicited” when, in fact, he had solicited each order.

Despite the occurrence of almost one thousand transactions in a concentrated number of inverse and leveraged exchange traded funds, Sterne Agee failed to investigate whether the transactions were, in fact, unsolicited. As a result of the incorrectly marked order tickets, the firm’s books and records were inaccurate.

Sterne Agee’s registration and disciplinary history

In order to lawfully sell investments to the public, one must either be registered or exempt from registration.

Sterne Agee is registered with the SEC, one SRO and in 52 states and territories.

According to FINRA’s CRD disclosure report, Sterne Agee has been the subject of three arbitrations and seven 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.



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