Legal Matters

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 [...]

The Frankowski Firm is investigating potential claims against former stockbroker Robert Edward “Bob” Wamhoff.  Until 2019, Mr. Wamhoff worked for the firm of Calton & Associates, Inc. of Saint Charles, Missouri. Mr. Wamhoff previously was with VSR Financial Services, Inc. which is in the Saint Louis, Missouri area. Customer Complaints Against Bob Wamhoff According to Financial Industry Regulatory Authority (“FINRA”) data, ten of Mr. Wamhoff’s customers have brought claims against him since 2009. The substance of these claims involved violations of FINRA rules and state securities laws, including: Breach of Fiduciary Duty, Suitability, Breach of Contract, violation of Securities Regulatory Rules, Common Law Claims, Ongoing Fraud, and Violations of Missouri Securities Act of 2003. Bob Wamhoff and UDF IV REIT One of the allegations against Mr. Wamhoff involved purchases of illiquid Real Estate Investment Trust (“REIT”) investments in United Development Funding IV (“UDF IV”), which were allegedly purchased against the client’s investment wishes and without the client’s knowledge. According to [...]