BD Pays $2.9 Million for Unsuitable ETF Sales
A large broker-dealer agreed to pay over $2.9 Million in fines and disgorgement for failing to follow its policies and procedures regarding the sales of leveraged, inverse, and inverse-leveraged ETFs. The firm adopted relevant compliance policies and procedures regarding retail sales of non-traditional ETFs following a FINRA Regulatory Notice in 2009. However, FINRA asserts that since that time, more than 760 reps executed more than 30,000 non-traditional ETF transactions totaling $1.7 Billion. FINRA faults the firm for failing to train its reps, prevent the unlawful sales, conduct surveillance, or perform adequate reasonable basis suitability due diligence. Brad Bennett, FINRA Chief of Enforcement, said, “Written procedures are worthless unless accompanied by a program to enforce them.”
OUR TAKE: A compliance program does not stop at well-drafted policies and procedures. That’s the easy part. The real compliance work involves enforcing those policies through operations, training, testing, and reporting.