The financial industry designates transactions in one of two ways: either a transaction is solicited or it is unsolicited. A solicited trade occurs where a registered representative contacts the client and initiates the buy or sell transaction. Conversely, where a client initiates the trade, the trade confirmation will indicate unsolicited denoting the registered representative did not contact the client to initiate the trade. The difference between a solicited and unsolicited trade is significant because registered representatives and broker-dealers may be held liable for unsuitable solicited trades, whereas they cannot be held liable, generally, for unsolicited trades.
FINRA’s Department of Enforcement investigated Smith and found he mismarked thousands of solicited transactions as unsolicited thereby causing Ameriprise’s books and records to be inaccurate in violation of federal securities laws. FINRA alleges from October 1, 2009 through January 25, 2013, Smith executed 8,169 trades. Smith marked the order tickets for 6,207 of those trades, or 76% of the total, as unsolicited. Ameriprise issued Smith a Letter of Reprimand on October 10, 2011, for, among other things, mismarking as unsolicited the order tickets for solicited trades. Nevertheless, Smith continued to bring securities to the attention of his customers, also known as investment recommendations, and marked the ticker orders as unsolicited when they should have been designated solicited.
Based upon the foregoing misconduct, FINRA alleged Smith violated NASD Rule 3110 (for orders entered prior to December 5, 2011), FINRA Rule 4511 (for orders entered after December 5, 2011), and FINRA Rule 2010. NASD Rule 3110(a) requires each member to make and preserve books and records in conformity with SEC Rule 17a-3, which in turn requires firms to make and keep, among other books and records, memoranda reflecting each brokerage order.
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 losses investing with Smith through Ameriprise, you may be eligible to bring a FINRA arbitration claim to recover your investment losses. Please complete our online form below or contact one of our attorneys at (800) 627-2179 for a free consultation.