Louis Ward of Ronkonkoma New York a former owner and Chief Executive Officer of KC Ward Financial has been fined $10,000.00 and suspended for six months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity supported by findings that Ward neglected to adequately supervise three KC Ward stockbrokers who gave customers bad advice. Letter of Acceptance Waiver and Consent No. 2017054267101 (Dec. 9, 2019).
According to the AWC, between June of 2010 and May of 2017, as Chief Executive Officer, Ward was responsible for managing the operations of the securities broker dealer which included supervising transactions recommended by KC Ward stockbrokers for suitability. Ward was required under the securities broker dealer’s written supervisory procedures to review a Monthly Active Accounts Report which covered accounts with the most activity. The supervisory procedures used by KC Ward also called for the review of a trade blotter and a binder with reports regarding active accounts. FINRA stated that Ward was also in charge of two supervisors who were involved in the suitability process.
Ward concluded that suitability was an issue between the customer and the stockbroker. Trading was not personally reviewed by him, and he did not ask the other supervisors to review the KC Ward customer accounts to determine if trading was appropriate. Instead, Ward directed his supervisors to discuss active accounts with stockbrokers and ask them to confirm within Active Account Worksheets whether they met with the supervisors, and whether customers were cognizant of the trading in their accounts. Following meetings between supervisors and stockbrokers in regard to active accounts, the supervisors provided Ward with an Active Account Worksheet which Ward used to determine if any follow up was warranted.
FINRA stated that between June of 2010 and May of 2017, Ward was made aware of several red flags pertaining to at least three KC Ward stockbrokers in regard to their recommendations of unsuitable, excessive transactions. He neglected to adequately follow up on red flags or otherwise determine if recommended transactions were suitable. Also, Ward neglected to check if his subordinate supervisors investigated red flags or did anything to address concerns of stockbrokers giving bad investment advice.
For example, the AWC stated that between January of 2015 and July of 2016, Ward failed to supervise a stockbroker who advised elderly customers to effect excessive trades. Those customers accounts contained annual cost-to-equity ratios exceeding fifty percent; and annual turnover ratios exceeding eighteen. The stockbroker’s activities led customers to sustain losses of $356,000.00 while having to pay commissions of $249,000.00. The stockbroker was never questioned by Ward or the other supervisors despite Ward having been cognizant of red flags regarding the stockbroker’s trading. Nothing was done to limit or otherwise stop the stockbroker’s trading. Also, the customers were never contacted in regard to the stockbroker’s allegedly unsuitable recommendations.
A second stockbroker whose activities Ward neglected to supervise made unsuitable investment recommendations causing his customers to sustain $427,000.00 in losses while having to pay commissions of $99,000.00. A third stockbroker made excessive trades causing his customer to sustain $72,000.00 in trading losses while being deprived of $127,000.00 in dividend payments and having to pay $376,000.00 in costs, mark-downs and mark-ups.
FINRA found Ward’s conduct violative of FINRA Rules 2010 and 3110 and National Association of Securities Dealers (NASD) Rule 3010.
FINRA Public Disclosure reveals that Ward has been identified in three customer initiated investment related disputes which pertain to accusations of his misconduct while employed with securities broker dealers including KC Ward Financial. For example, a customer initiated investment related arbitration claim concerning Ward’s activities was resolved for $140,000.00 in damages supported by allegations that the customer’s account failed to be supervised by Ward resulting in inappropriate trades that generated losses. FINRA Arbitration No. 17-00634 (May 15, 2018).
Ward’s registration with KC Ward Financial has been terminated as of December 31, 2017. Since January 2, 2018, he has been associated with Spartan Capital Securities LLC. Ward has been employed by at least eight different securities broker dealers who have either been expelled by securities regulators for violation of federal securities laws or are otherwise defunct. #cockroach
