FINRA Sanctions Pinnacle Investments, LLC for Supervisory Failures Involving Complex Products

Pinnacle Investments, LLC, a FINRA-registered broker-dealer, violated several industry rules, including Regulation Best Interest (Reg BI) and FINRA Rules 3110 and 2010, by failing to maintain a reasonable supervisory system for recommendations involving complex products such as leveraged and inverse exchange-traded products (NT-ETPs), as well as by failing to monitor for unauthorized trading and perform timely branch inspections. FINRA imposed a censure, a $65,000 fine, restitution of $53,847.99 plus interest, and an undertaking requiring the firm to remediate its supervisory systems.

Pinnacle Investments has operated as a FINRA member since 2007 and is headquartered in East Syracuse, New York, with approximately 70 registered representatives across 20 branches. Between 2020 and 2024, the firm failed to supervise recommendations of NT-ETPs appropriately, detect unauthorized discretionary trading, and conduct required inspections of certain branch offices. The firm remains in operation and subject to ongoing regulatory oversight.

Reg BI requires firms and their representatives to act in the best interest of retail clients when recommending securities or investment strategies, without placing their own financial interests first. FINRA Rule 3110 mandates that firms maintain supervisory systems, including written procedures, to monitor compliance with industry regulations. Rule 2010 broadly requires members to uphold high standards of commercial honor and ethical conduct. For example, a firm must ensure representatives understand and monitor complex products like NT-ETPs before recommending them, and must review trading to detect red flags like unauthorized transactions.

According to FINRA, Pinnacle failed to train its representatives properly or provide procedures for monitoring NT-ETP holding periods—despite the known risks associated with holding these products beyond a single day. One representative recommended NT-ETPs to 13 retail customers who held the products between 18 and 110 days, resulting in over $53,000 in losses. In addition, the firm lacked adequate systems to detect unauthorized trading activity, relying on flawed manual reviews and ineffective automated monitoring until mid-2024. Pinnacle also failed to inspect several branches within the required timelines, including one OSJ that went with inspection for over two years. These failures violated Reg BI and FINRA’s supervisory rules.

Lufrano Law, LLC is a national investment litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. Please contact us at (800) 627-2179 for more information if you have been the victim of investment negligence or fraud.

The content on this site reflects personal opinions and does not constitute statements of fact. No findings have been made against the firms or individuals mentioned. This blog is intended solely for educational purposes, drawing on publicly available information to provide general insights and a basic understanding of the law. It is not a substitute for legal advice.