First American Censured and Fined: Allegedly Failed to Establish and Maintain Supervisory Procedures Regarding Non-traditional ETF’s
First 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 Wolf Carr & Kane 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 Wolf Carr & Kane, Jason Kane or Joe Peiffer, for a free, no-obligation evaluation of their recovery options, at (585) 310-5140.