Brokerage Firm Sterne Agee Financial Services Fined as a Result of Leveraged ETF Sales

FINRA has fined Alabama brokerage firm Sterne Agee Financial Services, Inc. $25,000 for failing to properly supervise brokers. FINRA found that Sterne Agee failed to stop brokers from selling inverse or leveraged exchanged-traded funds (ETFs) even though the firm’s supervisory policies prohibited brokers from selling soliciting sales of the risky ETFs. From 2010 through 2013, Sterne Agee brokers apparently falsely marked approximately 1,000 of the trades as “unsolicited,” which means that the customers requested the trades. But Sterne Agee failed to investigate whether the trades actually were improperly solicited by the broker.

Leveraged or inverse ETFs are complex and risky investments that many investors do not understand. As a result, many brokerage firms, including Sterne Agee prohibit brokers from recommending that retail investors buy the ETFs. The supervisory failures described above likely subjected numerous investors to significant risks that the investors did not understand.

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Dimond Kaplan & Rothstein has represented leveraged ETF investors who lost money as a result of broker’s failure to disclose the risks of the securities. If you suffered leveraged ETF investment losses contact us to discuss your rights.

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