Stuart L. Pearl (also known as Stu Pearl) of Indianapolis Indiana a stockbroker formerly registered with David A. Noyes Company has been fined $5,000.00 and suspended for three months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon findings that he made unsuitable recommendations to David A. Noyes customers in regard to non-traditional exchange traded funds. Letter of Acceptance Waiver and Consent No. 2019060694202 (July 1, 2021).
According to the AWC, from March of 2017 to August of 2018, inverse exchange traded funds were recommended to four customers by Pearl when he did not reasonably comprehend the features and risks of the investments.
The AWC stated that non-traditional exchange traded funds are meant to return a multiple of a benchmark or index, and they could also be designed to return the opposite of the benchmark or index. These non-traditional products aim to achieve their returns in a day, and they rebalance daily. FINRA noted that these investments contain compounding risks, where the longer that the investments are held, the more that performance can differ from a benchmark or index. The regulator indicated that the investments are not normally suitable for certain customers including those who are unable to deal with volatile markets and those who plan to hold the investments for more than a day.
From March of 2017 to August of 2018, nine non-traditional exchange traded fund purchases had been recommended by the stockbroker to at least four of David A. Noyes’ customers. Pearl solicited those transactions. The investments were held by customers for 400 days on average. One customer held a position for 600 days. Customers collectively experienced about $80,000.00 in losses.
The AWC stated that there was no suitability analysis undertaken by the stockbroker concerning the risks and the features of these investments. NT-ETF prospectuses contained warnings which included that the investments were risky and meant for knowledgeable investors who comprehended the risks and features of those investments and who were planning to frequently and actively monitor their investments. The stockbroker also did not grasp how compounding presented risks of investor losses on NT-ETFs.
Pearl violated FINRA Rules 2010 and 2111 for making unsuitable recommendations.
Pearl was previously fined $7,500.00 and suspended for 45 days by FINRA based on findings that he effected unauthorized transactions in a customer’s account and made unsuitable recommendations resulting in a customer’s losses. Letter of Acceptance Waiver and Consent No. 2015046329201. He violated FINRA Rules 2010 and NASD Rules 2510(b) and 2310(a).
Pearl has been identified in five customer initiated investment related disputes concerning accusations of his misconduct at Ameriprise Financial Services, Morgan Stanley Smith Barney LLC and Citigroup Global Markets Inc. FINRA Public Disclosure confirms that a customer initiated investment related complaint concerning Pearl’s conduct was settled for $55,000.00 in damages founded on allegations of unauthorized margin borrowing and unauthorized trading of the customer’s account during the time that Pearl was associated with Ameriprise Financial services.
Another customer initiated investment related FINRA securities arbitration claim concerning Pearl’s conduct was resolved for $95,500.00 in damages supported by accusations of unauthorized trading at Ameriprise and Morgan Stanley. The claim alleges that unauthorized trades were made at Morgan Stanley. According to the claim, the stockbroker also made excessive trades and unsuitable recommendations for the customer’s account at Ameriprise Financial Services. Their account at Ameriprise was allegedly subjected to heavy margin use too.
Pearl is also the subject of a customer initiated investment related written complaint which was settled for $42,500.00 on July 1, 2019 based upon allegations of a hedge fund transaction being effected by the stockbroker without the customer’s consent at David A. Noyes. According to the complaint, the customer sustained losses on ETFs and stocks.
Pearl has been referenced in another customer initiated investment related written complaint which was resolved for $70,000.00 in damages on May 24, 2021 founded on accusations of the stockbroker establishing a David A. Noyes margin account for the customers without first speaking with them.
Pearl’s stockbroker registration was terminated by David A. Noyes on March 7, 2019 supported by allegations that he failed to comply with a heightened supervision arrangement.