Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from brokers whose firms promote high risk alternative investments and private placements. Did you know that brokerage firms can be held accountable when their brokers sell high-risk, illiquid investments that are unsuitable for their clients? Such was the case with Sanctuary Securities, which was forced to pay more than $530,000 in fines and restitution to investors for “failures to supervise certain product sales,” according to Advisorhub.com.
Sanctuary was fined $160,000 and ordered to pay restitution of $370,161.39 plus interest “for the various supervisory failures dating as far back as 2014 that were uncovered over multiple FINRA examinations, according to a letter of acceptance, waiver and consent finalized on July 1.” Formerly David Noyes and Company, Indianapolis-based Sanctuary has about 190 registered brokers and 35 offices. The company said that no current employees were involved in this action. The FINRA enforcement action involved the firm’s sales of money-losing, risky products called “leveraged exchange-traded funds (ETFs).” These investments multiply gains and losses based on market movements of popular securities indexes. These “non-traditional” or “alternative” investments can lose money for investors if brokers or investors guess wrong on market movements.
According to FINRA, from January 2014 through December 2018, “Sanctuary did not sufficiently address the unique features and risks related to solicited sales of inverse and leveraged ETFs (collectively, non-traditional ETFs) as required by suitability obligations under FINRA Rule 2111. Around 30 brokers recommended customers purchase about $5 million worth of non-traditional ETFs, resulting in significant net losses for those who held their positions for extended periods of time. The firm, meanwhile, generated roughly $60,000 in commissions over the course of about 600 purchases in 150 customer accounts,” FINRA stated.
FINRA also cited Sanctuary and several of its brokers for other violations:
- From January 2017 through January 2019, Sanctuary also failed to review and evaluate the outside business activities of about 15 registered representatives it had recruited and hired.
- From January through December 2018, Sanctuary also distributed sales materials for three private placement offerings that contained prohibited performance projections prepared by the issuer. The communications included projections relating to multiples on investment capital, internal rate of return, and average cash-on-cash percentage return over a future 15-year period.
- From January 2017 through January 2019, Sanctuary also failed to timely file offering documents with FINRA related to eight private placements sold by its registered representatives.
- Between April and August 2019, Sanctuary failed as a placement agent to terminate an offering of securities that did not meet a minimum contingency requirement under the terms of a private placement memorandum and return funds to investors, FINRA said.
Have you invested with broker-advisers who have put your retirement funds at risk or failed to protect you from ultra-risky investments? FINRA and the SEC have strict rules on financial disclosures by brokers and investment advisers. If they don’t protect your account, you may have a case in arbitration.
If you invested with a broker-advisor and lost money as a result, you may have a claim to pursue through FINRA Arbitration. Please contact Stoltmann Law Offices, P.C. at 312-332-4200 for a free, no obligation consultation with a securities attorney. Stoltmann Law Offices is a contingency fee law firm which means we do not get paid until you do!