The Frankowski Firm

UBS Financial Services Inc. ("UBS") recently settled charges with the Securities and Exchange Commission ("SEC") concerning its failure to adopt and implement suitable investment policies for volatility-linked exchange-traded products ("ETPs") from January 2016 to January 2018. The SEC found that UBS's discretionary Portfolio Management Program ("PMP") financial advisors purchased and held the iPath S&P 500 VIX Short-Term Futures ETN ("VXX") for advisory clients, which was inconsistent with the product's intended purpose as outlined in offering documents and communicated to UBS by the issuer of VXX. In response to the SEC's findings, UBS agreed to a settlement without admitting any wrongdoing. The terms of the settlement include a censure, disgorgement, and prejudgment interest totaling $112,274, as well as a civil penalty of $8 million. The funds from the penalty will be distributed to investors affected by UBS's actions. SEC Order Details The SEC filed a settled action against UBS on July 19, 2021, citing compliance failures related to the sale of [...]

Investors Face potential losses based on the actions of securities broker David Wayne Krumrey (CRD#: 4121845, The Woodlands, Texas). Krumrey, who was associated with Oppenheimer from 2009 to 2017, has been involved in at least 6 investor disputes, leading to serious repercussions. FINRA (Financial Industry Regulatory Authority) has barred Krumrey from practicing as a securities broker, raising concerns about potential breaches of fiduciary duty and investor damages. Here are the key details: Lawsuit Alleging Negligence and Breach of Fiduciary Duty: In April 2020, Oppenheimer clients initiated a FINRA Arbitration Claim against David Krumrey, asserting that he failed to fulfill his fiduciary duty, neglecting their best interests. The allegations suggest that Krumrey or Oppenheimer negligently advised the clients to invest in stocks and oil and gas securities between 2016 and 2017, including VXX (Barclays iPath Series B SP500 VIX Short-Term Futures ETN). The clients further claimed that Krumrey mismanaged their account, resulting in a demand for $300,000 in compensation. Lawsuit Related [...]

SEC has taken action against Royal Alliance Associates   The Securities and Exchange Commission (SEC) has taken action against Royal Alliance Associates (RAA) due to substantial losses suffered by advisory clients holding the iPath S&P 500 VIX Short-Term Futures ETN, commonly known as VXX. The SEC has imposed a fine of over $500,000 on RAA for its failure to establish and implement effective policies and procedures to prevent unsuitable investments in volatility-linked exchange-traded products (ETPs). According to the cease-and-desist order 3-20152, the SEC found that RAA's investment adviser representatives exercised discretionary authority over client accounts, resulting in the purchase and prolonged holding of the complex VXX exchange-traded note (ETN). These actions were inconsistent with the intended purpose of the product as stated in its offering materials, leading to significant losses for customers exposed to VXX. Between 2016 and 2020, at least 108 RAA advisory client accounts held VXX for extended periods, ranging from several months to even years. This extended [...]

FINRA Warned of Risks of VIX-Linked Exchange Traded Products   A recent spike in stock market volatility has brought into focus the enormous risks associated with certain exchange-traded-products (ETPs) linked to the Chicago Board Options Exchange (CBOE) Volatility Index (VIX). However, these products have previously been the subject of several warnings by the Financial Industry Regulatory Authority (FINRA). Created in 1993, the VIX attempts to track broadly measured volatility in the market.  VIX is an index, not a security, but certain ETPs have attempted to allow investors to track the performance of the VIX index.  One such ETP is Credit Suisse’s VelocityShares Daily Inverse VIX Short-Term ETN (ticker symbol XIV), which the issuer shuttered earlier this month after investors experienced unexpectedly large losses during a spike in the VIX.  Other ETP products that may pose similar risks include Proshares SVXY, VelocityShares ZIV, iPATH XXV, and REX VolMaxx VMIN. ETPs have previously come under scrutiny by FINRA.   In October of [...]