FINRA Sanctions Sigma Financial for Failure to Supervise
The White Law Group is investigating potential securities claims involving Sigma Financial Corporation, in Ann Arbor, Michigan (CRD#: 14303).
FINRA Sanctions Sigma Financial Corp. for Failure to Supervise ETFs
March 2019 – According to the Financial Industry Regulatory Authority (FINRA), the regulator censured and fined Sigma Financial Corp., $100,000 after allegations that it failed to supervise the sales of non-traditional ETFs, including inverse ETFs or leveraged ETFs.
FINRA alleged that between May 2014 and December 2016, Sigma failed to have procedures in place to adequately supervise the sales of inverse and leveraged ETFs. According to FINRA, Sigma purportedly made 1,475 transactions in inverse and leveraged ETFs during this time, earning commissions of about $292,000. Sigma Financial Corp. settled the allegations with FINRA and paid the $100,000 fine, according to a Letter of Acceptance Waiver and Consent filed last March.
While leveraged and inverse ETFs can help traders exploit extremely short-term market movements, they definitely are unsuitable for the vast majority of investors. Typically, their holding periods should be very short.
Aggressive financial advisors may have unsuitably recommended ETFs in an effort to juice returns. Financial advisors, though, are required to recommend only those investments that are suitable for an investor in light of that investor’s age, net worth, income, investment experience, and investment objectives.
Over-concentrated exposure to any sector or investment is unsuitable for most investors. Diversification is the key to reducing risk.
This is not the first time Sigma Financial has had issues with regulators.
FINRA orders Sigma Financial Corp. to pay Restitution to Customers.
August 2016 – FINRA reportedly fined Sigma $100,000 and ordered the broker-dealer to pay $92,053.63 in financial restitution for customer overcharges. According to FINRA, the firm failed to properly identify and apply available sales charge waivers on Unit Investment Trusts (UITs).
Also during the Relevant Period, Sigma Financial reportedly failed to establish, maintain and enforce a supervisory system and written supervisory procedures reasonably designed to ensure customers receive sales charge discounts on all eligible UIT purchases.
A Unit Investment Trust (UIT) is a type of Investment Company that offers redeemable units in a diversified portfolio of securities. The portfolio is generally made up of stocks and bonds or a combination of both, and is held for a specific length of time.
A UIT will have a specific termination date at which time the portfolio is liquidated and the proceeds are paid to investors. The length of time a UIT is held can range from one year to more than fifty years from the date of inception. However, investors can usually sell their units at any time. Most UIT’s will buy back units and resell the units to new investors.
Often clients are encouraged to reinvest or roll over their units at termination. Each time you reinvest you will get hit with the sales charge and other fees. In addition you will likely incur a capital gains tax when the UIT matures.
Brokerage firms and RIAs are required to perform due diligence on any offering they recommend. They must ensure that all recommendations are suitable in light of the client’s age, investment experience, net worth, income, and investment objectives.
If a firm fails to perform due diligence or makes an unsuitable recommendation, a broker-dealer can be held responsible for any losses in a FINRA arbitration claim and an RIA can be held responsible either in a private arbitration or in court.
If you have suffered losses investing with Sigma Financial Corp., the securities attorneys may be able to help you by filing a FINRA Dispute Resolution claim against the firm. Please call the offices at 888-637-5510.
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. The firm represents investors throughout the country in claims against their brokerage firm.
For more information on the firm and its representation of investors, visit www.WhiteSecuritiesLaw.com.