BROWSE BY TOPIC
- Bad Brokers
- Compliance Concepts
- Investor Protection
- Investments - Unsuitable
- Investments - Strategies
- Wall Street News
- Investments - Private
- Rules & Regulations
- Bad Advisors
- Boiler Rooms
- Terminations/Cost Cutting
- General News
- Donald Trump & Co.
- Regulatory Sanctions
- 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 - Strategies
Lessons from an Agreed-Upon Investment Strategy Gone Bad
by Howard Haykin
In September 2018, a New Orleans-based broker with Century Securities Associates sat down with his client to map out an investment strategy. Over the next 8 months, the broker implemented that strategy, executing 6 trades on 4 dates The broker did not consult with the customer each time he executed a trade. By May 2019, however, the account had lost $1,844 and the customer complained. The firm compensated the customer for his losses, and then fired by broker for having “exercised discretion without written authorization.” FINRA, the securities regulator, conducted its own investigation, which resulted in additional sanctions.
What most concerned Century Securities and FINRA was … the fact that the broker failed to consult with his customer before each trade – notwithstanding the fact that the pair had previously agreed upon an investment strategy. Simply stated, the broker wasn’t authorized for discretionary trading in that customer’s account.
What most concerned the Customer were … the $1,844 in losses - though it’s not at all clear why the customer needed to complain directly to the firm. Here are some possibilities – which might prepare investors for the next time their brokers or investment advisers suggest investment strategies.
- The broker didn't explain the strategy in clear terms.
- The broker didn't identify attendant risks, including the risk that investments could initially fall in price.
- The broker guaranteed that the investments would generate profits.
- The broker overlooked the fact that the investments were not suitable for this customer – e.g., they were too volatile.
- The broker failed to update the customer - say, monthly or quarterly - on the progress of the strategy.
[For further details, click on … FINRA Case #2019062882001.]