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Essex Securities Censured and Fined By FINRA Over Mutual Fund Sales

Essex Securities LLC (CRD #46605, Topsfield, Massachusetts)

was censured, fined $20,000, ordered to pay $6,009.70, plus interest, in restitution to clients and required to review its supervisory systems and WSPs regarding the sale of mutual funds for compliance with FINRA rules and the federal securities laws and regulations. FINRA imposed a lower fine in this case after it considered, among other things, the firm’s revenues and financial resources.

According to FINRA, allegedly Essex Securities LLC engaged in a pattern of unsuitable mutual fund switching in client accounts, without having reasonable grounds for believing that such transactions were suitable for those customers, in view of the nature of the recommended transactions, the frequency of the transactions and the transaction costs incurred.

FINRA’s findings stated that the registered representative recommended that the clients sell mutual funds within only one to 13 months after purchasing them. Essex Securities LLC earned gross commissions of approximately $60,000 on these switch transactions, of which the registered representative earned approximately $54,000. On average, the clients held the Class A mutual funds at issue for less than six months. The registered representative then used the proceeds of those sales to purchase mutual funds offered by other fund families for those customers, causing the customers to pay additional commissions.

FINRA’s findings also stated that Essex Securities LLC failed to establish and maintain a supervisory system, including WSPs, reasonably designed to prevent unsuitable mutual fund switching. Essex Securities LLC did not have any exception reports or procedures to monitor for trends or patterns involving representatives who effected multiple mutual fund switch transactions for a customer within a short time period. Essex Securities LLC failed to reject any of the mutual fund switches that the registered representative effected in her customers’ accounts.
(FINRA Case #2011025433901)

The information summarized from FINRA’s “Disciplinary and Other FINRA Actions January 2015” ends here.

If you have suffered mutual fund losses due to the recommendation of a broker or brokerage firm, you may have a claim for damages. Please contact Soreide Law Group to discuss your rights at: (888) 760-6552.

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WASHINGTON —It was announced July 20, 2011, on FINRA’s website that The Financial Industry Regulatory Authority (FINRA) has suspended William Bailey, a former NEXT Financial Group, Inc. broker of Mesa, Arizona, from the securities industry for two years for unsuitable and excessive trading of mutual funds and variable annuities. Bailey also engaged in discretionary trading without receiving prior written approval from his customers.

It was reported that FINRA found between January 2006 and December 2007, Bailey recommended 484 short-term mutual fund switch transactions in seven customer accounts. In each of the accounts, Bailey, on his customers’ behalf, repeatedly sold mutual funds less than one year after purchasing them, and purchased new mutual funds with the proceeds. With Bailey’s frequent switches, on average, his customers held their mutual funds for only 60 days. The seven customers, who ranged in age from 66 to 93 and were all unsophisticated investors, incurred over $147,000 in sales charges and trading fees. Bailey received over $120,000 in commissions from these sales. To facilitate his mutual fund trading scheme, Bailey frequently traded in his customers’ accounts without first obtaining their permission and improperly completed customer account forms to make it appear the customers approved of the trading.

 In the FINRA article it was reported that FINRA also found Bailey convinced three customers to switch their variable annuities for new ones after holding them for a short period of time. These exchanges were unsuitable based on the customers financial objectives and needs, and did not improve the customers’ financial situations.

 Mr. Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, “Brokers who engage in excessive trading will be held accountable. In this case, Mr. Bailey rapidly switched his elderly and unsophisticated customers in and out of mutual funds with high costs, providing a benefit to Bailey instead of to his customers.”

In settling this matter, Bailey neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

This information was obtained on FINRA’s website.

Securities Attorney, Lars Soreide, of Soreide Law, PLLC, has represented clients nationwide. If you or a family member feel you have become a victim of William Bailey or Next Financial Group, Inc., or a similar situtation, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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