BROWSE BY TOPIC
- Investments - Private
- Investor Protection
- Investments - Unsuitable
- Compliance Concepts
- Investments - Strategies
- Regulatory Sanctions
- Rules & Regulations
- Bad Advisors
- Bad Brokers
- Boiler Rooms
- Wall Street News
- Terminations/Cost Cutting
- General News
- Donald Trump & Co.
- Big Banks
Stories of Interest
- Sarah ten Siethoff is New Associate Director of SEC Investment Management Rulemaking Office
- Catherine Keating Appointed CEO of BNY Mellon Wealth Management
- Credit Suisse to Pay $47Mn to Resolve DOJ Asia Probe
- SEC Chair Clayton Goes 'Hat in Hand' Before Congress on 2019 Budget Request
- SEC's Opening Remarks to the Elder Justice Coordinating Council
- Massachusetts Jury Convicts CA Attorney of Securities Fraud
- Deutsche Bank Says 3 Senior Investment Bankers to Leave Firm
- World’s Biggest Hedge Fund Reportedly ‘Bearish On Financial Assets’
- SEC Fines Constant Contact, Popular Email Marketer, for Overstating Subscriber Numbers
- SocGen Agrees to Pay $1.3 Billion to End Libya, Libor Probes
- Cryptocurrency Exchange Bitfinex Briefly Halts Trading After Cyber Attack
- SEC Names Valerie Szczepanik Senior Advisor for Digital Assets and Innovation
- SEC Modernizes Delivery of Fund Reports, Seeks Public Feedback on Improving Fund Disclosure
- NYSE Says SEC Plan to Limit Exchange Rebates Would Hurt Investors
- Deutsche Bank faces another challenge with Fed stress test
- Former JPMorgan Broker Files racial discrimination suit against company
- $3.3Mn Winning Bid for Lunch with Warren Buffett
- Julie Erhardt is SEC's New Acting Chief Risk Officer
- Chyhe Becker is SEC's New Acting Chief Economist, Acting Director of Economic and Risk Analysis Division
- Getting a Handle on Virtual Currencies - FINRA
We seek to provide information, insights and direction that may enable the Financial Community to effectively and efficiently operate in a regulatory risk-free environment by curating content from all over the web.
Stay Informed with the latest fanancialish news.
NEWSLETTERS & ALERTS
Investments - Unsuitable
Hidden Figures at Van Clemens & Co.
by Howard Haykin
A 44-year old woman moved her IRA to Van Clemens and Co., a small Minneapolis-based broker-dealer, where her broker, Peter Monson, took control of the account and excessively traded microcap stocks. Before becoming Monson’s customer 2 years earlier, she had only invested in mutual funds and never purchased individual stocks.
At the time the woman made the move, the IRA account was worth $429,000. Two-and-a-half years later, the account value was down to $76,000 – thanks to $215,000 in trading losses and broker commissions, along with a $138,000 withdrawal used to finance a family business.
WHAT WENT WRONG. From the outset, Monson asserted effective control over the customer’s account. Besides the fact that the broker rarely spoke with his customer, it was clear the woman had little understanding about managing a securities portfolio. Perhaps she was also intimidated by Monson who, when they first met, had 20 years’ experience and a clean disciplinary record. For that matter, Van Clemens had been in business since 1975 and it too had a relatively clean track record.
However, it didn’t take long for matters to deteriorate:
- Monson traded excessively. Rather than take a conservative approach - i.e., to buy and hold (invest) in stocks - Monson engaged in frequent trading, including occasional in-and-out trades. Over one 13-month period, he executed 187 trades in the account.
- Monson focused nearly entirely on risky ‘microcap’ stocks. Monson had no interest in buying shares of large companies that traded on stock exchanges. Instead, he traded small public companies with market capitalizations of between $50 million to $300 million that traded over-the-counter. 'Microcap' stocks, in general, are riskier and less stable and, because there’s limited public information available about these companies, fraud and market manipulation are quite common in ‘microcaps’.
- Monson concentrated the account heavily in individual securities. Rather than diversify, Monson repeatedly loaded up on shares of individual companies. One such company, Alpha Natural Resources (‘ANR’), accounted for nearly 26% of her portfolio. Unfortunately, one month after acquiring the shares, the price of ANR shares fell 85%.
- Van Clemens and Co. failed to supervise the account. Despite Monson’s excessive and unsuitable trading, firm supervisors did nothing to slow down the trading or otherwise protect the customer.
- Customer learned she had advanced-stage cancer. Even upon learning that the customer was deathly ill with advanced-stage cancer, Monson continued to actively trade the account.
HIDDEN FIGURES – UNDISCLOSED SETTLEMENT. After the customer’s death, Van Clemens and Monson entered into a settlement agreement with the customer’s estate concerning losses resulting from the unsuitable trading. Yet, there’s nothing on record to disclose the customer’s complaint or the terms of this settlement – i.e., HIDDEN FIGURES. Sadly, the first anyone learned of the violative conduct by the firm and the broker was when FINRA posted its sanctions against the pair – more than 3 years after the violations occurred.
It's interesting to note that Monson is still on Van Clemens' payroll. They apparently deserve one another.