International Assets Advisory LLC a securities broker dealer headquartered in Orlando Florida has been censured and fined $30,000.00 by Financial Industry Regulatory Authority (FINRA) founded on accusations that the securities broker dealer failed to create and implement a reasonable supervision system and written supervisory procedures for purposes of ensuring suitability or appropriateness of its stockbrokers’ non-traditional exchange traded fund recommendations. Letter of Acceptance Waiver and Consent No. 2017056579501 (Dec. 13, 2019).
According to the AWC, International Assets Advisory neglected to create and implement a reasonable supervisory protocol to address suitability of non-traditional exchange traded products – investments which are meant to return a multiple of an underlying benchmark or index typically in just one day. The securities broker dealer’s system and written supervisory procedures failed to factor in risks and features pertaining to the alternative investments. These risks included customers holding the investments for prolonged periods.
The AWC stated that International Assets Advisory had procedures which called for suitability reviews by supervisors when the non-traditional exchange traded products were purchased, but those procedures were defective because there was no guidance as it pertained to the supervisory review. For example, the procedures failed to guide supervisors in determining whether the securities were fitting for customers when taking into account their unique characteristics. In addition, the securities broker dealer failed to put in place exception reports or other systems to help supervisors adequately monitor holding periods of the non-traditional exchange traded products.
The firm’s supervisory failures led to a stockbroker making bad recommendations to at least five customers. Specifically, the stockbroker advised customers to buy and maintain twenty-one non-traditional exchange traded product positions. These investments were held by the customers for three hundred twenty-seven days on average. FINRA stated that the stockbroker neglected to comprehend the risks and features of these investments and lacked an adequate foundation to conclude that his recommendations were appropriate.
In fact, a customer suffered $92,805.13 in losses based on the bad investment advice received by the stockbroker. FINRA found that International Assets Advisory failed to supervise in violation of FINRA Rules 3110(a) and 3110(b) in addition to National Association of Securities Dealers (NASD) Rules 3010(a) and 3010(b).
