First American Censured and Fined: Allegedly Failed to Establish and Maintain Supervisory Procedures Regarding Non-traditional ETF’s

investor rights attorneyFirst American, headquartered in Orrville, Ohio, has been charged by FINRA with failure to establish and maintain an adequate supervisory system for non-traditional exchange-traded funds (ETFs).

Therefore, according to the aforementioned AWC, FINRA censured First American and also fined it $10,000.

FA, a registered FINRA-member since 1994 and with approximately 22 registered representatives operated its shop with several alleged supervisory deficiencies in connection with the sale of non-traditional ETFs, according to the AWC.

FINRA Cites a Minimum of Three Supervisory Failures in First American’s ETF Operation

For starters, First American allegedly permitted its financial advisors to recommend and sell non-traditional ETFs to the public without reasonably supervising the business activity, to be precise, First American’s written supervisory procedures did not directly reference the sale of non-traditional ETFs, according to the AWC.

In addition, FINRA has alleged that First American did not provide its employees with any training regarding non-traditional ETFs, and that they also allegedly failed to provide their employees, including supervisory personnel, with reports that would indicate the length of time a customer held non-traditional ETFs in the their account.

FINRA has made it known that non-traditional ETFs are designed to provide a rate of return that is a multiple of an underlying index or benchmark, or in the case of an inverse ETF, moves in an opposite direction to the underlying index or benchmark.  For the most part, non-traditional ETFs were created with the intention to be held in the customer’s account for a short duration, sometimes even as limited as one trading day.

Based upon the foregoing allegations, FINRA’s AWC alleges that First American violated several NASD and FINRA Rules.

Investment Rights Lawyers Investigating

The Peiffer Rosca Wolf investment rights lawyers often represent investors who lose money as a result of investment misconduct. They take most cases of this type on a contingency fee basis and advance the case costs, and only get paid for their fees and costs out of money they recover for their clients.

Investors who believe they lost money as a result of investment misconduct may contact the investment rights lawyers at Peiffer Rosca Wolf, Alan Rosca or Joe Peiffer, for a free, no-obligation evaluation of their recovery options, at 888-998-0520.

Alan Rosca (1180 Posts)

Alan is a securities lawyer. He also teaches Securities Regulation at the Cleveland-Marshall College of Law. He focuses his legal practice on complex commercial and financial litigation and arbitration, particularly in the areas of securities and investment fraud. His office is in Cleveland, Ohio.


In our legal system, every person is innocent until and unless found guilty by a court of law or a tribunal. Whenever we reference “allegations” or charges that are “alleged,” such allegations or charges have not been proven, and are merely accusations, not findings of fault, as of the date of the blog. We do not have, nor do we undertake, a duty to continue to monitor or follow cases about which we report, and/or to publish subsequent blogs regarding various developments that may occur in such cases. Readers are encouraged to conduct their own research regarding any such cases and any developments that may or may not have occurred in such cases.