FINRA Sanctions Four Firms $9.1 Million for Stockbroker Fraud (Part 1)
Who was Sanctioned for Stockbroker Fraud?
On May 1, 2012 the Financial Industry Regulatory Authority (FINRA) sanctioned Citigroup Global Markets, Inc; Morgan Stanley & Co., LLC; UBS Financial Services; and Wells Fargo Advisors, LLC more than $9.1 million for stockbroker fraud. FINRA says it sanctioned the firms for selling “leveraged and inverse exchange-traded funds (ETFs) without reasonable supervision and for not having a reasonable basis for recommending the securities.” Of the sanctioned funds, $7.3 million was for fines and $1.8 for restitution to certain customers who made unsuitable leveraged and inverse ETF purchases based on bad advice due to the firm’s failure “to conduct adequate due diligence regarding the risks and features of the ETFs.“ [1]
FINRA’s Stockbroker Fraud Sanctions Break Down
The negligence displayed by the four firms is a form of stockbroker fraud called misinformation. Misinformation for any reason will lead a client to make a decision they would not otherwise have made if they had known the true risks and features of the investment. FINRA distributed the sanctions on the four companies like this:
- Wells Fargo to pay $2.1 million in fines and $641,489 in restitution.
- Citigroup to pay $2 million in fines and $146,431 in restitution.
- Morgan Stanley to pay $1.75 million in fines and $604,584 in restitution.
- UBS to pay $1.5 million in fines and $431,488 in restitution.
FINRA Comments on Stockbroker Fraud
How did the firms commit stockbroker fraud though neglect? Executive Vice President and Chief of Enforcement for FINRA, Brad Bennett, said “”The added complexity of leveraged and inverse exchange-traded products makes it essential that brokerage firms have an adequate understanding of the products and sufficiently train their sales force before the products are offered to retail customers. Firms must conduct reasonable due diligence and ensure that their representatives have an understanding of these products.”
Next on Stockbroker Fraud
Next in this news series on the most recent FINRA sanctions, we’ll talk about how the complexities of ETF’s, a type of UIT, may have contributed to the misconduct.
If you are not getting anywhere with resolving your investment disputes, believe you are the victim of stockbroker fraud or just need help discussing your options with the securities arbitration process, call S. David Anton of Anton Legal Group!
S. David Anton, Esquire is a Certified Arbitrator for the Financial Industry Regulatory Authority (FINRA), formerly the NASD, which is the national organization responsible for overseeing the securities industry. He has served as a Judge/Panelist and rendered decisions in many securities arbitration, giving him a unique perspective on his client’s cases.
FOR SECURITIES ADVICE, PLEASE FEEL FREE TO CONTACT DAVID ANTON OF THE ANTON LEGAL GROUP
AT (813) 443-5249