CFD Investments, Inc., a broker-dealer headquartered in Kokomo, Indiana, has been censured and fined $30,000.00 by Financial Industry Regulatory Authority (FINRA) based upon consenting to findings that the firm failed to supervise non-traditional exchange traded fund transactions effected by the firm’s registered representatives in customer accounts. Letter of Acceptance, Waiver and Consent, No. 2014039216501 (Sept. 7 ,2017).
According to the AWC, from October of 2012 to July of 2014, a total of one-hundred and fifty exchange traded fund transactions were effected by seven CFP Investments stockbrokers in the firm’s customer accounts. The AWC stated that the firm failed to adequately supervise the transactions, which involved 2,000,000.00 worth of inverse and leveraged exchange traded fund sales. Apparently, the firm lacked written procedures designed to assess risks and features of non-traditional exchange traded funds, and did not formally train stockbrokers who effected the sales in that regard.
Apparently, the firm lacked surveillance and exception reports assessing holding times for the non-traditional exchange traded funds, causing the firm to be unable to determine when holding times were not suitable. As a result, customers purchasing the products held them for approximately three hundred days on average. FINRA ultimately found that the firm failed to supervise the firm’s non-traditional exchange traded fund sales to comply with FINRA rules; conduct violative of FINRA Rules 2010 and NASD Rule 3010.
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