Mass. Regulators Charge Purshe Kaplan with Failure to Supervise Harvest Group’s Sales of Leveraged ETFs 

On February17, 2022, Massachusetts state securities regulators charged Broker-dealer Purshe Kaplan Sterling Investments (PKS Investments) with failure to supervise brokers who sold unsuitable investments to customers while operating as independent investment advisors through The Harvest Group Wealth Management. 

According to the complaint, PKS Investments “utterly failed” to review transactions by dually-registered representatives with The Harvest Group Wealth Management who had allegedly recommended an unsuitable buy-and-hold strategy with leveraged exchange-traded funds that led to more than $2.3 million in client losses. 

PKS reportedly did not review or flag thousands of transactions between August 2017 and April 2020, according to the complaint.  

The Harvest Group purportedly invested more than 340 client accounts in leveraged ETFs for long periods of time, despite the fact that the Financial Industry Regulatory Authority has warned that leveraged ETFs are meant only for short-term trades. 

According to the complaint, the Harvest Group clients who held the ETF positions for more than one year suffered significant losses. The leveraged ETFs in question reportedly included Proshares Ultra QQQ and Proshares Ultra S&P 500, which sought daily investment results corresponding to two times the single-day returns of the Nasdaq-100 and the S&P 500 Index, according to the complaint. 

PKS reportedly caters to former brokers who make a move to become fee-based registered investment advisors (RIAs) and want to continue to receive commissions. While the thousands of transactions in question were conducted outside of the agents’ employment with PKS, the broker-dealer was required to review these transactions as part of its supervisory responsibilities, according to the complaint. 

Massachusetts regulators said that The Harvest Group reps had executed at least 2,814 transactions in the two leveraged ETFs, beginning in August 2017, but even after PKS amended its policies in 2019 to conduct risk-based reviews of dually-registered advisors’ outside transactions, the company still purportedly failed to conduct any reviews that year, and conducted only one transaction review in 2020. 

In addition to a censure and fine, Massachusetts regulators are seeking full restitution for Massachusetts investors who suffered losses from the alleged failure to supervise. 

(To learn more, please see: Risks of Investing in leveraged and inverse exchange-traded funds (ETFs))

Free Consultation with a National Securities Attorney  

If you have suffered investment losses with Harvest Group and leveraged ETFs, the securities attorneys at the White Law Group may be able to help you. For a free consultation, please call the offices at 888-637-5510.    

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