FINRA’s Department of Enforcement investigated Daggett’s alleged misconduct in connection with a customer complaint. FINRA alleged that from March 2010 to September 2011, Daggett recommended and traded transactions in an ETN and non-traditional ETFs in accounts held by one of his customers. In particular, FINRA asserted Daggett concentrated two of the customer’s accounts in a speculative ETN, an inverse triple leveraged ETF, and a triple leveraged ETF.
The problem with non-traditional ETFs is that they carry many risks that are not apparent to unsophisticated customers. For example, the prospectus for the ETFs disclosed the following: the ETN may not be suitable for investors that are not willing to be exposed to fluctuations in volatility in general and to a daily rolling long position in futures contracts on the Chicago Board Options Exchange Volatility Index; and are intended for short-term trading and may not be appropriate for intermediate or long term investment time horizons. Nonetheless, FINRA alleged Daggett recommended that the customer hold the investments for periods ranging from approximately one month to two years.
Based upon the foregoing alleged misconduct, FINRA contends Daggett violated NASD Conduct Rules 2310 and IM-2310-2 and FINRA Rule 2010. Under NASD Conduct Rule 2310, financial advisors are required to recommend suitable investments and investment strategies to their clients (known as the suitability rule). Typically, a claim for unsuitable investments is brought as a form of a negligence claim with the theory: the financial advisor had a duty to recommend suitable investments; the financial advisor breached the duty with unsuitable investments; and the financial advisors unsuitable investments caused the investor damages.
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 losses investing with Daggett through Wells Fargo, you may be able to recover your losses through FINRA arbitration. Our firm only receives a fee if you recover money. Please complete the contact form or contact one of our attorneys at (800) 627-2179 to schedule a free consultation.