Bruce A. Lefavi Securities, Inc., a brokerage firm headquartered in Salt Lake City, Utah, has been censured and fined $25,000.00 by Financial Industry Regulatory Authority (FINRA) based upon consenting to findings that the firm failed to supervise customer transactions and violated FINRA’s content standards. Letter of Acceptance, Waiver and Consent, No. 2015043353301 (Nov. 10, 2017).
According to the AWC, in 2014, the firm created and disseminated four communications to a number of customers, where the content contained in those communications failed to be balanced or fair. Particularly, the communications failed to detail the risks pertaining to business development companies and real estate investment trust investments, and did not adequately address significant terms and conditions of the investments so that investments could be evaluated properly.
The AWC stated that in the communications to customers, the firm erroneously implied that a real estate investment trust would not be exposed to market instability. The firm also claimed that dividends would be paid from the real estate investment trust; however, the investment operations precluded the real estate investment trust from paying distributions. Additionally, the AWC stated that the communications lacked any reference to the source of payments made to customers, and failed to address the fees, characteristics and features relating to business development companies. The firm evidently compared business development companies to bond investments but failed to explain how the two investments were different. FINRA found the firm’s failure to meet content standards to be violative of FINRA Rules 2010, 2210(d)(1) and 2210(d)(2).
Moreover, the AWC revealed that ninety nine percent of the firm’s customers maintained accounts with LWM – an investment advisory. The AWC stated that from July of 2013 to December of 2014, customers were charged commissions on all business development company and real estate investment trust purchases. The LWM customers who purchased those investments were also exposed to an annual asset management fee based on the value of the securities transferred to their investment advisor accounts.
Critically, the AWC stated that no supervision systems and written supervisory procedures had been created and implemented by the firm to address fee-based accounts and the additional charges that customers incurred from the transactions through LWM. Particularly, there was no established process for identifying the appropriateness of advisory services and products offered to customers through the investment advisor and the fees customers paid for advisory services. FINRA found that the firm’s supervisory failures in that regard were violative of FINRA Rules 2010, 3110(a), 3110(b), and NASD Rules 3010(a) and 3010(b).
This is not the first time that Bruce A. Lefavi Securities, Inc. has been sanctioned for content violations. Specifically, the firm was censured and fined $75,000.00 by FINRA by consenting to findings that the firm used inappropriate sales literature and advertisements. Letter of Acceptance, Waiver and Consent, No. 2013034965201 (July 7, 2014). According to the AWC, the firm communicated with prospective investors within a book, website and radio advertisement format, where those communications were unwarranted, plagued with omissions and unwarranted claims, and failed to provide investors with an adequate basis to evaluate the investments offered. FINRA also found that Bruce Lefavi, as the firm’s president and owner, solicited the purchase of equity interests that were not registered. FINRA found that the firm violated FINRA Rules 2010 and 2210.
FINRA Public Disclosure reveals that Lefavi is the subject of five customer initiated investment related disputes pertaining to allegations of Lefavi’s misconduct while employed with Bruce A. Lefavi Securities, Inc. Specifically, on July 31, 2001, a customer filed an investment related written complaint involving Lefavi’s activities, where the customer requested $35,000.00 in damages supported by accusations that Lefavi failed to inform her of sales charges and expenses, among other terms associated with a Hartford Life variable annuity that the customer purchased.
Then, on August 22, 2003, a customer initiated investment related written complaint regarding Lefavi’s conduct was resolved for $2,500.00 in damages founded on allegations that Lefavi effected an unauthorized liquidation of the customer’s accounts. Further, on May 18, 2004, a customer filed an investment related written complaint involving Lefavi’s conduct, where the customer sought $131,486.00 in damages based upon accusations that Lefavi effected unsuitable limited liability company interest transactions.
Moreover, on January 26, 2012, a customer filed a complaint relating to Lefavi’s activities, where the customer requested $15,000.00 in damages supported by allegations that Lefavi failed to invest the customer’s assets in mutual funds in a timely manner. On January 20, 2015, another customer complaint pertaining to Lefavi’s conduct was resolved for $75,315.34 in damages resting on allegations that Lefavi effected two business development company transactions that were not suitable for the customer, and omitted information about the terms and conditions of the investments.
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