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FINRA Cases: Craig Scott Capital Expelled Over Excessive Trading Claims, CFD Investments Fined $30K to Resolve Inadequate Supervision Allegations Involving ETFs, and H. Beck Broker is Accused of Making Unsuitable Investment Recommendations

Craig Scott Capital, LLC Loses FINRA Membership After Its Representatives Are Accused of Excessive Trading

The Financial Industry Regulatory Authority has expelled Craig Scott Capital, LLC over finding that three of the firm’s registered representatives allegedly engaged in excessive trading in the accounts of customers. The self-regulatory organization said that the charges imposed on customers, including markdowns, markups, and commissions, were not in line with the latter’s financial states and goals.

Now, FINRA is holding Craig Scott Capital accountable for the excessive trading, which it described as churning. This type of excessive trading involves making trades in a customer’s account in order to earn a commission.

FINRA is also accusing the firm of not putting into place and enforcing a “reasonable supervisory system” to prevent excessive trading and failing to properly supervise the registered representatives involved in the alleged wrongdoing so these behaviours could have been prevented. The regulator accused Craig Scott’s owners of not taking reasonable action even though they detected the red flags indicating that excessive trading might be taking place.

CFD Investments Settles FINRA Case Alleging Inadequate Supervision of Nontraditional ETFs

FINRA said that CFD Investments will pay a $30K fine to resolve the regulator’s findings that the firm did not put into place and “enforce” a supervisory system that could properly review the sales of leveraged and inverse exchange-traded funds by its representatives. CFD Investment settled without admitting or denying the findings.

According to the self-regulatory organization, about 150 transactions were involved in CFD Investments’ sales of $2M of non-traditional ETFs to customers. The firm is accused of failing to have adequate written procedures to deal with the risks involved and not formally training the representatives that sold these investments to retail customers. Also, said FINRA, a number of customers ended up holding these ETFs for “long periods” because the firm lacked the surveillance tools to monitor accounts for “potentially unsuitable and lengthy holding periods.”

H. Beck Registered Rep. Accused of Making Unsuitable ETF Recommendations to Pro Athlete

H. Beck is censured and fined $50K following FINRA’s finding that a registered representative at the firm recommended nontraditional exchange-traded funds and mining and metals stocks to a customer even though they were not suitable for him. The client, a professional athlete who was an unsophisticated investor and could only handle a moderate degree of risk, lost over $1.1M.

FINRA said that H. Beck let its financial representative recommend non-traditional ETFs even though it hadn’t put into place a supervisory system that could make sure that these were suitable for customers. The firm also failed to provide “specific guidance” to help brokers and their supervisors determine whether a non-traditional ETF would be suitable for an investor.

Also, in this instance, the H. Beck rep. purportedly did not make sure that the investments recommended to the athlete were a good match for his investment portfolio.

The athlete, who filed a securities arbitration claim against H. Beck, has already settled with the firm for $1.5M.

The SSEK Partners Group is a securities law firm that represents investors throughout the US. Contact us today.


More Blog Posts:
Securities Firms: JP Morgan Securities to Pay $1.25 For Inadequate Background Checks of Thousands of Employees and Gray Financial Group Settles with SEC Over Unsuitable Investments to Pension Funds, SSEK Blog, November 22, 2017

Credit Suisse Resolves NY Regulator’s Forex Rigging Probe for $135M, Institutional Investor Securities Blog, November 15, 2017

Singer Financial Corp. Accused of Making Illegal Securities Offering of Promissory Notes to Unsophisticated Investors, SSEK Blog, November 15, 2017

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