Brokerage firm First Financial Equity Corp. (“FFEC”) has been fined and censured by FINRA for wide-ranging supervisory and compliance failures, including inadequate supervision of sales of non-traditional ETFs and multi-class variable annuities.
According to FINRA’s published findings, during the period of June 24, 2013 through April 7, 2015, FFEC failed to establish, maintain, and enforce an adequate supervisory system to ensure that the firm’s sales of leveraged and inverse-leveraged exchange traded funds (ETFs) complied with applicable securities laws and FINRA Rules.
Regulators have been clamping down on sales practice violations relating to nontraditional ETFs in recent months. FINRA recently imposed a $2.25 million fine on Oppenheimer & Co. for unsuitable sales of non-traditional ETFs. Due to this increased regulatory scrutiny, many brokerage firms are now prohibiting their brokers from recommending shares of leveraged and inverse leveraged ETFs to retail customers.
In addition to FFEC’s supervisory failures relating to ETFs, FINRA also found that FFEC failed to establish, maintain, and enforce WSPs or provide sufficient guidance or training to its registered representatives and principals on the sale of long term income riders with multi-share class VAs, particularly the combination of L-share contracts with long-term income riders. Income riders are designed for investors with long-term investment time horizons, whereas L shares are designed for investors with short-term horizons, which makes the combination of the two features inherently unsuitable.
FINRA identified a multitude of additional supervisory failures by FFEC during the time January 1, 2010 through June 23, 2013. The deficiencies ranged from failing to establish and maintain an adequate supervisory system, failing to establish written supervisory procedures (WSPs) to address portions of its business, failing to have adequate WSPs, failing to enforce certain of the WSPs that it did have, and failing to reasonably supervise a registered representative who was charging commission’s that the Firm’s risk manager deemed excessive (i.e. churning).
If you have suffered investments losses as a result of the negligence or misconduct of FFEC, we may be able to assist you in recovering some or all of your losses. Call securities law attorney Dan Broxup at Mika Meyers, PLC for a free, no-obligation consultation.