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- Julie Erhardt is SEC's New Acting Chief Risk Officer
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NEWSLETTERS & ALERTS
Broker Reaps Sales Awards While Cheating Customers
by Howard Haykin
Recently, a broker working for Cetera Advisor Networks, a California-based broker-dealer, cheated 14 of his customers - some of whom were senior investors. Working from his home in Pennsylvania, the broker repeatedly bought and sold hundreds of Class A mutual fund shares for his customers’ accounts.
Buying and selling mutual fund shares is not illegal, but doing so to run up one’s commission revenues is. And that was the sole reason this broker engaged in these in-and-out trades – also known as short-term mutual fund ‘switches’. Class A mutual fund purchases are designed to be held for long periods - not to be bought and sold repeatedly as this broker did.
For years, the brokerage firm chose to award this broker for his high sales production numbers rather than punish him for misconduct. However, the broker was eventually caught by industry regulators and thrown out of the industry - though it was too late for 14 of his customers who lost nearly $700,000.
For further details on this case, click on ... FINRA AWC #2014040951702.