FSC Securities Corporation of Atlanta, Fined, Censured, and Ordered to Pay Restitution by FINRA Over Non-Traditional ETF Sales

Soreide Law Group obtained the following information on FINRA’s website, which is available to the public, in the October 2017 Disciplinary Report on the following firm:
FSC Securities Corporation (CRD #7461, Atlanta, Georgia)
was censured, fined $100,000, and ordered to pay $492,485.33 in restitution to clients by FINRA for allegedly executing approximately 6,500 purchases of leveraged, or inverse, or both inverse and leveraged exchange-traded funds (non-traditional ETFs) in approximately 1,400 retail customer accounts without establishing and maintaining a supervisory system, including written procedures, reasonably designed to ensure that FSC Securities Corporation’s offering of non-traditional ETFs complied with NASD® and FINRA rules.
FINRA’s findings stated that non-traditional ETFs have certain risks that are not associated with traditional ETFs or equities. FSC’s general supervisory system was not sufficiently tailored to address the unique features and risks involved with these products. Those purchases were worth approximately $92 million and generated approximately $603,000 in commissions.
FINRA’s findings also stated that FSC allegedly allowed registered representatives to recommend non-traditional ETFs without establishing a reasonable supervisory system or written supervisory procedures (WSPs) specifically addressing these products. While FSC Securities Corporation prohibited the offering of certain kinds of non-traditional ETFs, it allegedly allowed the offering of other kinds of non-traditional ETFs to continue without implementing a reasonable system and written procedures to supervise those offerings.
According to the FINRA report, during most of the relevant period, allegedly the firm did not have exception reports or any alerts in the firm’s electronic trade review system that addressed the risks posed by non-traditional ETFs. Also, FSC failed to monitor non-traditional ETF holding periods.
Also, FINRA’s findings stated that FSC Securities Corporation, by and through its registered representatives, recommended non-traditional ETFs to clients without fully understanding the features and risks associated with those products. The firm allowed its registered representatives to make unsuitable recommendations of non-traditional ETFs to many clients with conservative and moderate investment objectives and risk tolerances, some of whom were elderly. Many of those clients allegedly held the investments over extended periods of time, and they sustained losses of $492,485. FINRA states that the firm failed to perform any reasonable-basis suitability analysis of non-traditional ETFs.
(FINRA Case #2010024620303)
If you were a client of FSC Securities Corporation of Atlanta, Georgia, and you experienced losses, particularly those investments in non-traditional ETFs, due to their recommendations, call Soreide Law Group and speak to an experienced securities lawyer regarding the recovery of your investment losses through a FINRA arbitration at:  888-760-6552.
Soreide Law Group represents clients nationwide before FINRA and we operate on a contingency fee basis.