Daniel Joseph Hushek III, of Sarasota, Florida, a stockbroker formerly registered with G.F. Investment Services, LLC, has been fined $10,000.00 and suspended for fifteen months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon consenting to findings that he failed to reasonably supervise a registered representative who consequently made unsuitable investment recommendations regarding exchange traded fund transactions and effected inappropriate transactions in customer accounts. Letter of Acceptance, Waiver and Consent, No. 2013035817702 (July 14, 2017).
According to the AWC, from March of 2011 to July of 2015, a registered representative, RM, effected forty-four unsuitable trades in forty-one customer accounts involving non-traditional exchange traded funds. The AWC described the non-traditional exchange traded funds as complex products that utilize derivatives, futures and swaps in order to provide investors with returns that are several times the performance of an index or benchmark.
The AWC stated that the funds which RM recommended were meant to achieve objectives daily and had not been geared for extended holding periods. Yet, the AWC revealed that the investments were held by certain of RM’s customers for more than five years. Apparently, RM made recommendations for customers to hold their investments in exchange traded funds pending a market crash that would never occur. Customers reportedly invested pursuant to RM’s recommendations and incurred losses exceeding $2,400,000.00.
The AWC stated that Hushek was the supervisor for RM during the period of his wrongdoing, and failed to appropriately supervise RM’s exchange traded fund recommendations and resulting transactions. Particularly, Hushek never ascertained whether the transactions that RM effected were appropriate for customers. Hushek also reportedly failed to make sure that RM had an adequate foundation to conclude that the investments he recommended should be held for longer periods. Moreover, the speculative transactions were effected in the account of at least one customer who wished to invest conservatively.
Hushek was also cited by FINRA for failing to make sure that customers were cognizant of the risks pertaining to non-traditional exchange traded funds, especially in regard to prolonged holding periods, as he merely sent customers a letter requesting that customers confirm their objectives for investing. The AWC stated that red flags known by Hushek were never adequately addressed, resulting in RM’s continued wrongdoing. FINRA found that Hushek’s conduct in this regard was violative of FINRA Rules 2010 and 3110, as well as NASD Rule 3010.
Hushek’s registration with G.F. Investment Services, LLC was terminated on January 27, 2017.
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