BROWSE BY TOPIC
- Bad Brokers
- Compliance Concepts
- Investor Protection
- Investments - Unsuitable
- Investments - Strategies
- Investments - Private
- Features/Scandals
- Companies
- Technology/Internet
- Rules & Regulations
- Crimes
- Investments
- Bad Advisors
- Boiler Rooms
- Hirings/Transitions
- Terminations/Cost Cutting
- Regulators
- Wall Street News
- General News
- Donald Trump & Co.
- Lawsuits/Arbitrations
- Regulatory Sanctions
- Big Banks
- People
TRENDING TAGS
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
ABOUT FINANCIALISH
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.
SUBSCRIBE FOR
NEWSLETTERS & ALERTS
FOLLOW US
Quantitatively Unsuitable Trading for Elderly Customers
by Howard Haykin
WHAT WENT WRONG. Between January 2012 and September 2016 (the "Relevant Period"), the broker engaged in quantitatively unsuitable trading in the accounts of 3 senior customers: a widow, aged 95, and a married couple in their 70s.
Among the many similarities:
- Both the widow and the married couple each had a net worth in excess of $5 million.
- Each had several accounts at UBS, including a brokerage account.
- Each had the investment objective as ‘income and capital appreciation, and the risk profile as ‘moderate’.
- Trading in each account was based entirely on the broker’s recommendations.
During the Relevant Period:
- Annualized turnover rates: 16.07 for the widow; 25.84 for the couple.
- Annualized cost-to-equity ratio: 31.75% for the widow; 35.05% for the couple.
- Portfolio losses: $283,000 for the widow; $239,000 for the couple.
- Commissions and markups: $260,000 for the widow; $210,000 for the couple.
- The S&P 500 Index rose 70% from 1/6/2012 (1,278) to 9/30/2016 (2,168).
By virtue of the foregoing, the broker violated its suitability rules - NASD Rule 2310 and FINRA Rule 2111.
FINANCIALISH TAKE AWAYS. FINRA was unequivocal in its conclusion that the broker engaged in quantitatively unsuitable trading because he has actual or de facto control over the customers’ accounts and his trading was excessive and unsuitable given the customers’ investment profiles, including their ages and risk tolerances.
-
Why Only An 8-Month Suspension … for this broker who “raked over” his wealthy elderly customers’ accounts for more than 4-1/2 years - violative conduct that was pre-meditated and purposeful?
-
Were UBS and/or its Supervisory Personnel Sanctioned … for enabling this broker to conduct this long-running display of quantitatively unsuitable trading? One reason the firm and its branch manager might have looked the other way was they had huge incentives for the trading to continue - $470,000 in commissions and markups from just 2 accounts.
This case was reported in FINRA Disciplinary Actions for January 2019.
For further details, go to ... FINRA Disciplinary Actions Online, and refer to Case #2017052874401.
