Lance J. Ziesemer, of Wayzata, Minnesota, a stockbroker for Feltl & Company, was fined $7,500.00 and suspended for three months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity after consenting to findings that he made unsuitable recommendations to customers. Letter of Acceptance, Waiver and Consent, No. 2013036524903 (May 12, 2016).
According to the AWC, Ziesemer had made recommendations to Feltl clients regarding the purchase and sales of unit investment trusts. The AWC stated that from January 2011 through December 2012, recommendations by Ziesemer were made to two clients, BV and GH, for such clients to sell unit investment trusts when such investments were held for a suspiciously short period of time.
In the AWC, FINRA noted that the UIT investments, which are comprised of fixed securities that have a specified termination date, are not meant to be used for trading. FINRA also noted in the AWC that the UIT products commonly have substantial charges that are assessed up front to clients, which further suggest that the products are not designed for a short holding period.
Apparently, Ziesemer recommended that GH and BV sell the products as early as one month after purchase, only to utilize the funds from the sale in order to purchase more unit investment trusts. The clients followed Ziesemer’s recommendations, and effected thirty-six switches in the UIT products.
The AWC stated that Feltl’s procedures called for switch letters to be provided to the client and signed prior to the effecting of UIT sales when new UITS (which carry new commissions and/or sales charges) would be applied. The AWC reported that all thirty-six transactions should have prompted such switch letters to be signed by the clients, yet Ziesemer did not procure any.
According to the AWC, the switching of such UIT investments led customers to suffer aggregate losses of $160,000.00. Yet, such customers paid $64,815.00 in commissions in the aggregate, of which Ziesemer pocketed $38,889.00. FINRA found that Ziesemer’s conduct was violative of FINRA Rules 2010, 2111, and NASD Conduct Rule 2310. In addition to the fine and suspension, FINRA disgorged Ziesemer of his commissions.
This is not the first time that Ziesemer has been subject to a FINRA disciplinary action. On November 24, 2008, Ziesemer consented to a $5,000.00 fine and twenty-day suspension for paying customers off (settling away) in order to keep them from lodging a complaint against Ziesemer. Letter of Acceptance, Waiver and Consent, No. 20070089649 (Nov. 21, 2008).
Public disclosure records also reveal that Ziesemer has been subject to six other disclosure incidents. On May 16, 2007, Ziesemer was named in a customer dispute alleging unsuitability, unauthorized trading, and improper margin use. On January 25, 2013, Ziesemer settled a customer dispute for $50,000.00 after a customer alleged excessive trading and unsuitability.
On June 12, 2003, Ziesemer settled another customer dispute for $150,000.00 amid allegations of unsuitability, misrepresentations, and unauthorized trading. From April 1, 2016 through April 18, 2016, Ziesemer became subject to two additional complaints (pending), in which customers alleged excessive and unauthorized trading, and unsuitability.
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