Legal Matters

The Financial Industry Regulatory Authority (“FINRA”) has barred former First Standard Financial, LLC representative Robert F. Spiegel based on FINRA’s findings that Spiegel engaged in an unsuitably high-volume of trading in the account of one of his elderly clients. FINRA found that from October 2016 to December 2017, Spiegel recommended to his customer, a 70-year old farmer, an unsuitably high turnover rate of trades in the customer’s account, including a significant number of trades using margin (i.e., loaned money). According to FINRA’s findings, Spiegel’s trading resulted in a high turnover rate and cost-to-equity ratio while suffering significant investment losses. FINRA found that the account exhibited an annualized cost-to-equity ratio of 113%, while losing $77,334 on investments but generating $18,047 in commissions and fees. FINRA found Spiegel’s conduct to be in violation of FINRA Rule 2111, which requires member firms or their associated persons have a reasonable basis to believe that a recommended securities transaction or investment strategy is suitable for [...]

The Securities and Exchange Commission has fined Wells Fargo Advisors $35 million for unsuitable sales of complex single-inverse Exchange Traded Funds (ETFs) to customers without the investment experience or risk tolerance to make such trades. The type of ETF at issue is designed for short-term trading, typically a day, by betting against an index. If held longer, customers may experience significant losses. The SEC found that “Wells Fargo recommended that certain clients buy and hold, in many cases for months or years, single-inverse ETFs with daily reset features, including in retirement accounts. Some of these clients had little or no relevant investing experience and had been identified to Wells Fargo as clients with moderate or conservative risk tolerances.” The SEC charged Wells Fargo with unsuitable investment recommendations and for failure to implement adequate policies and procedures to supervise the transactions and advisers, who did not understand the products. Wells Fargo previously was sanctioned ty the Financial Industry Regulatory Authority (“FINRA”) [...]

The Financial Industry Regulatory Authority (“FINRA”) has fined and censured Chelsea Financial Services, of Staten Island, New York.  FINRA found that, from January 2016 through July 2018, Chelsea Financial failed to establish and maintain a supervisory system and written supervisory procedures reasonably designed to achieve compliance with FINRA’s rules related to suitability and excessive trading. Specifically, FINRA found that a now-former Chelsea Financial broker, who was unnamed, recommended unsuitable and excessive trades (also known as “churning”) in three customer accounts. FINRA Rule 3110 requires that each member firm establish and maintain a supervisory system, and establish, maintain, and enforce written supervisory procedures, that are reasonably designed to supervise the activities of each registered representative of the firm and achieve compliance with applicable securities laws and regulations. FINRA Rule 2111 (the “suitability” rule) requires member firms or their associated persons to have a reasonable basis to believe that a recommended securities transaction or investment strategy is suitable for the customer in [...]

The Financial Industry Regulatory Authority (“FINRA”) has permanently barred McNally Financial Services Corporation representative Dennis Masaaki Nakamura from the securities industry based on his refusal to give testimony during FINRA’s investigation into allegations that he made unsuitable investment recommendations to his customers. The ban follows a customer’s allegation in November 2019 that Nakamura caused financial damages of $443,000 in the customer’s account based on losses in unsuitable investments Nakamura recommended. In July 2018, Nakamura settled another customer’s $492,000 claim based on unauthorized trading, unsuitable trade recommendations, failure to supervise, excessive trading, and elder abuse. Nakamura’s FINRA BrokerCheck report shows that he was hired by McNally Financial Services Corporation in 2010 and worked in its Moraga, California branch. When hired by McNally Financial, Nakamura already had four customer disputes on his record, including allegations of over-charged commissions, elder abuse, fraud, misrepresentations, and unsuitable trading. Nakamura picked up two additional customer disputes while employed by McNally Financial before FINRA barred him from [...]