John D. Wiswell of Stuart, Florida, a stockbroker with American Portfolio Financial Services, was fined $5,000 and suspended for fifteen business days from association with any Financial Industry Regulatory Authority (FINRA) member in any principal capacity after consenting to findings that she failed to supervise a Stockbroker’s conduct in order to prevent unsuitable recommendations from being made to customers. Letter of Acceptance, Waiver and Consent, No. 20130394827-01 (Dec. 30, 2015).
According to the AWC, from May 2011 through May 2013, Wiswell had supervised Stockbroker JD. Wiswell’s responsibilities as JD’s supervisor included reviewing JD’s mutual fund transactions for suitability; and ensuring that switch letters were obtained from customers (when applicable) that acknowledged their understanding of the consequences of the transaction. The AWC stated that during the relevant period, JD recommended forty-nine unsuitable mutual fund switch transactions in twelve customer accounts. JD’s customers reportedly incurred approximately $46,000 in sales charges. The firm returned such amount to JD’s customers, the AWC stated.
The AWC indicated that JD’s transactions had presented multiple red flags which suggested that he was engaging in unsuitable mutual fund switching. Some red flags had included a significant number of potential switch alerts; transactions involving placing his customers exclusively into Class A shares that contained substantial upfront sales loans; commissions which were high; most customers to whom JD recommended switch transactions were elderly; and JD had failed to obtain switch letters from customers. FINRA found Wiswell’s failure to reasonably supervise JD to be in violation of NASD Conduct Rule 3010(a) and FINRA Rule 2010.
FINRA, via NASD Rule 3010(a), requires that firms and supervisory personnel establish and maintain a supervisory system that is reasonably designed to achieve compliance with applicable securities laws and regulations. Additionally, Rule 3010(b) requires that firms establish, maintain and enforce written procedures to supervise their business and Stockbrokers that are reasonably designed to achieve compliance with applicable securities.
Securities brokerage firms have a duty to supervise their brokers and the sales practices of their brokers, and to review customer statements for, among other things, evidence of suitability, unauthorized trading, or excessive activity.
Public disclosure records reveal that John D. Wiswell has been subject to three disclosure incidents. On January 9, 2002, Wiswell settled a customer dispute for $20,000 after claimants alleged breach of contract, fraud and breach of fiduciary duties. On January 28, 2009, Wiswell settled a customer dispute for $300,000 after a customer alleged respondeat superior, violation of FL statutes 517.301, and unauthorized trading. On July 26, 2010, Wiswell settled a customer dispute for $18,750.00 amid allegations of lack of supervision.
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