Van Clemens Co. Inc. of Minneapolis Minnesota has been censured and fined $50,000.00 by Financial Industry Regulatory Authority (FINRA) based upon accusations that the firm failed to supervise its business practices with a view towards protecting against excessive trading by Van Clemens stockbrokers in customer accounts. Letter of Acceptance Waiver and Consent No. 2017053162101 (Aug. 19, 2019).
According to the AWC, between June 1, 2015 and June 30, 2016, the firm neglected to create and implement an adequate supervision system and written supervisory procedures for purposes of ensuring that customer account transactions had been reviewed by the firm for possible unsuitable or excessive trading. FINRA revealed that the written supervisory procedures utilized by Van Clemens were vague as it related to quantitative unsuitability. The securities broker dealer’s failure to cover information on quantitative unsuitability meant that there was no procedure utilized for identifying possible excessive trading.
FINRA also found that the firm’s existing procedures, which did address churning, failed to cover instances of trading misconduct aside from stockbrokers executing trades solely to generate commissions. The AWC indicated that the lack of clarification in the firm’s supervisory procedures indicated that the firm did not care about quantitative suitability.
FINRA also revealed that supervisors of Van Clemens had not been adequately instructed by the firm concerning instances of excessive trading. In fact, the AWC stated that supervisors failed to receive training by the firm concerning excessive trading. FINRA also indicated that there were no reports citing cost-to-equity ratios or turnover rates available for supervisory personnel even if supervisors intended to review accounts for excessive trading. FINRA added that from June 1, 2015 to June 30, 2016, the securities broker dealer neither possessed statistics or calculated figures relevant to determining excessive trading.
FINRA found that one of Van Clemens’ stockbrokers, Peter Douglas Monson, provided unsuitable advice to a customer concerning trades placed in the customer’s account. The customer’s account contained a cost-equity ratio exceeding thirty-two percent and an annual turnover rate exceeding nine which indicated possible excessive trading. The AWC also stated that PM’s trading was inappropriate given the customer’s financial situation and objectives for investing. In fact, PM’s trading led the customer to sustain losses exceeding $100,000.00 in just over a year’s period. FINRA found the firm’s failure to supervise to be violative of FINRA Rules 2010 and 3110.
