Douglas Gene Schmitz (also known as Doug Schmitz), of Fargo, North Dakota, a stockbroker registered with Classic LLC and owner of Classic Asset Management LLC, has been censured and fined $100,000.00 by Securities and Exchange Commission (SEC) because Schmitz breached his fiduciary duties. In the Matter of Classic Asset Management LLC and Douglas G. Schmitz, Administrative Proceeding File No. 3-21403 (May 4, 2023).
SEC found violations of the duty of care and compliance failures by Classic Asset Management LLC (CAM), a registered investment advisor. Additionally, SEC found Schmitz’s breach of the duty of care. SEC noted that Schmitz invested customers’ money in leveraged exchange-traded funds (known as LETFs) for long periods and in large amounts, despite the LETFs’ prospectuses stating that they carry unique risks and are meant for short-term trading with active monitoring.
SEC claimed that Classic Asset Management and Schmitz did not have a valid reason to invest in these LETFs and failed to comprehend their basic characteristics. Consequently, they did not act in the best interests of their customers.
The Order indicated that despite being warned about the need for frequent monitoring, Classic Asset Management and Schmitz did not reasonably monitor the performance of the LETFs. Classic Asset Management also neglected to establish and enforce procedures and policies to prevent violations of Investment Advisers Act. Therefore, SEC found that Schmitz violated Investment Advisers Act Section 206(2).
Financial Industry Regulatory Authority (FINRA) Public Disclosure shows that Schmitz is referenced in three customer initiated investment related disputes concerning Schmitz’s conduct while registered with securities broker dealers, including Classic LLC. On July 24, 2020, a customer filed an investment related complaint involving Schmitz’s conduct in which the customer requested compensatory damages based upon allegations that Schmitz failed to execute a stop loss order when Schmitz was registered with Classic LLC. The securities broker dealer closed out the complaint without a resolution.
On August 4, 2020, another customer filed an investment related complaint involving Schmitz’s conduct in which the customer requested $40,000.00 in damages based upon allegations that Schmitz breached his fiduciary duties in connection with the recommendation and sale of leveraged exchange traded funds. The securities broker dealer closed out the complaint without a resolution.
Schmitz is also referenced in a Classic LLC customer initiated investment related complaint that was settled on November 23, 2020, for $275,000.00 in damages based upon allegations that Schmitz failed to execute a stop loss order in the customer’s account.
Schmitz has been registered with Classic LLC as a stockbroker since November 27, 2012. He has also been registered with Classic Asset Management LLC as an investment advisor representative since July 5, 2006.
