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.
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