FINRA sanctions FSC Securities in Atlanta, GA for Supervisory Issues
According to FINRA, FSC Securities Corporation (CRD #7461, Atlanta, Georgia) was issued an AWC on August 10, 2017 in which the firm was censured, fined $100,000, and ordered to pay $492,485.33 in restitution to customers.
Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it executed approximately 6,500 purchases of leveraged, or inverse, or both inverse and leveraged exchange-traded funds (non-traditional ETFs). Approximately 1,400 retail customer accounts were affected.
The firm allegedly did not establish and maintain a supervisory system, including written procedures, reasonably designed to ensure that the firm’s offering of non-traditional ETFs complied with NASD® and FINRA rules.
The findings also stated that non-traditional ETFs have certain risks that are not associated with traditional ETFs or equities. The firm’s general supervisory system was reportedly not sufficiently tailored to address the unique features and risks involved with these products. Those purchases were worth approximately $92 million and generated approximately $603,000 in commissions.
The findings also stated that the firm allowed registered representatives to recommend non-traditional ETFs without establishing a reasonable supervisory system or written supervisory procedures (WSPs) specifically addressing these products.
While the firm prohibited the offering of certain kinds of non-traditional ETFs, it reportedly allowed the offering of other kinds of non-traditional ETFs to continue without implementing a reasonable system and written procedures to supervise those offerings.
According to FINRA, during most of the relevant period, the firm allegedly did not have exception reports or any alerts in the firm’s electronic trade review system that addressed the risks posed by non-traditional ETFs. Moreover, the firm reportedly failed to monitor non-traditional ETF holding periods.
The findings also included that the firm, by and through its registered representatives, recommended non-traditional ETFs to customers without fully understanding the features and risks associated with those products.
The firm reportedly allowed its registered representatives to make unsuitable recommendations of non-traditional ETFs to many customers with conservative and moderate investment objectives and risk tolerances, some of whom were elderly.
Moreover, many of those customers held the investments over extended periods of time, and they sustained losses of $492,485. The firm purportedly failed to perform any reasonable basis suitability analysis of non-traditional ETFs.
For FINRA’s full findings see FINRA Case #2010024620303.
Investigating Potential Claims
The White Law Group is investigating the liability that FSC Securities may have for losses sustained by their clients. Brokerage firms are required to adequately supervise their agents to ensure they are complying with FINRA rules. If it is determined that the broker dealer failed to supervise their agents, they can be held responsible for losses in a FINRA arbitration claim.
Are you concerned about your investment losses with FSC Securities? The attorneys at The White Law Group may be able to help you. For a free consultation with a securities attorney, please call (888) 637-5510.
The foregoing information, which is all publicly available on FINRA’s website, is being provided by The White Law Group. The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Franklin, Tennessee.
For more information on The White Law Group, please visit www.whitesecuritieslaw.com.