FINRA’s Department of Enforcement recently investigated Alton Securities and determined it did not establish, maintain and enforce a reasonable supervisory system, including written supervisory procedures to supervise Non-Traditional ETFs or Non-Traditional Mutual Funds. Specifically, FINRA alleged Alton Securities failed to conduct adequate due diligence on Non-Traditional ETFs and Non-Traditional Mutual Funds and failed to adequately train its registered representatives on the unique risks associated with these products. Moreover, Alton Securities allegedly sold these non-traditional investments to retail customers for periods that exceeded one trading session.
FINRA alleged Alton Securities engaged in multiple violations of federal securities laws and industry rules and regulations, including MSRB Rules G-27 and G-30; NASD Rules 2310, 2440, 3010(a); and FINRA Rules 2010 and 2111. Specifically, under NASD Rule 3010, a brokerage firm owes a duty to all of its clients to monitor and supervise its employees properly. The rule states: “[e]ach member shall establish and maintain a system to supervise the activities of each registered representative…that is reasonably designed to achieve compliance with applicable securities laws and regulations…”
If a FINRA-member fails to supervise its employees or conduct proper due diligence on investment products, then the firm may be liable to the customer for damages or disciplined by FINRA, or both. Here, FINRA censured Alton Securities and ordered it to pay $75,000 for other supervisory failures.
Lufrano Law, LLC is a national securities litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. If you suffered investment damages investing in Non-Traditional ETFs or Mutual Funds through Alton Securities, you may be able to recover your losses through FINRA arbitration. Our firm only receives a fee if you recover money. Please contact one of our attorneys at (800) 627-2179 to schedule a free consultation or complete our free case evaluator.