A broker-dealer settled FINRA charges for failing to implement a supervisory system designed to protect customers in connection with the sale of "volatility-linked exchange-traded products" ("Volatility ETPs"). FINRA found that the broker-dealer made Volatility ETPs available for solicited purchases without having a reasonable supervisory system in place to "ensure that its brokers and customers understood the nature and characteristics of these products or the risks inherent in holding them for long-term periods."
FINRA determined that due to these failures, the broker-dealer's customers sustained losses after purchasing Volatility ETPs on a solicited basis and holding them for long periods of time. As a result of its conduct, FINRA alleged that the broker-dealer violated FINRA Rules 3110 ("Supervision") and 2010 ("Standards of Commercial Honor and Principles of Trade").
To settle the charges, the broker-dealer agreed to (i) a censure, (ii) a $325,000 fine, and (iii) restitution in the amount of $333,619.34, plus interest.
Primary Sources
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
