FINRA Sanctions Four Firms $9.1 Million for Stockbroker Fraud (Part 2)

Last Week’s Stockbroker Fraud Sanctions

Last week, in Part 1 of this blog series, I told you the story of how four large firms were sanctioned $9.1 million by FINRA for defrauding their investors. Today, I’m going to tell you how they got away with it and help pass on how particular investments lend themselves to stockbroker fraud.

Leveraged and Inverse ETF’s Make Stockbroker Fraud a Snap

To understand the failures that lead to the stockbroker fraud, we need to talk about ETF’s. FINRA says “ETFs are typically registered unit investment trusts (UITs) or open-end investment companies whose shares represent an interest in a portfolio of securities that track an underlying benchmark or index. Leveraged ETFs seek to deliver multiples of the performance of the index or benchmark they track. Inverse ETFs seek to deliver the opposite of the performance of the index or benchmark they track, profiting from short positions in derivatives in a falling market.” FINRA says that from January 2008 to June 2009 the firms “did not have adequate supervisory systems in place to monitor the sale of leveraged and inverse ETFs, and failed to conduct adequate due diligence regarding the risks and features of the ETFs.” Read more about this at So the firms didn’t have enough information to recommend the ETF’s. They also recommended the much more risky leveraged and inverse ETF’s in a volatile market to investors with conservative investment objectives, selling billions of dollars of the stocks to uninformed and misinformed investors.

Next on Stockbroker Fraud

Next in this news series on the most recent FINRA sanctions, we’ll get deeper into the risks and complexities of ETF’s, which may have contributed to the misconduct. If you are not getting anywhere with resolving your investment disputes, believe you are the victim of stockbroker fraud or just need help discussing your options with the securities arbitration process, call S. David Anton of Anton Legal Group.

S. David Anton, Esquire is a Certified Arbitrator for the Financial Industry Regulatory Authority (FINRA), formerly the NASD, which is the national organization responsible for overseeing the securities industry. He has served as a Judge/Panelist and rendered decisions in many securities arbitration, giving him a unique perspective on his client’s cases.

To schedule your securities law consultation, call the Anton Legal Group today at 813-443-5249.