WFG Investments, Inc., headquartered in Dallas, Texas, has been censured and fined $150,000.00 by Financial Industry Regulatory Authority (FINRA) based upon allegations that the firm failed to supervise a stockbroker who effected unsuitable trades in the firm’s customer accounts. Letter of Acceptance, Waiver and Consent, No. 2015045755003 (May 31, 2017).
According to the AWC, from January of 2012 to June of 2013, a WFG Investments stockbroker, MB, traded customer accounts excessively in securities which had been priced at or under five dollars a share. The customers’ low-priced securities transactions were reportedly effected both in the firm’s customer accounts as well as in accounts of the firm’s advisory business that MB was authorized to effected securities transactions in. Evidently, customers’ accounts became overconcentrated in these types of securities because of MB’s activities.
Particularly, the AWC revealed that MB concentrated sixty-seven percent of purchases made in advisory accounts in low priced securities in 2012. Apparently, by 2013, this figure increased to eighty percent. The AWC stated that the customers consequently held investments in real estate investment trusts as well as private placement offerings which were risky and illiquid. Moreover, MB apparently concentrated customers’ accounts in these securities without regard to customers’ differing objectives for investing, tolerance of risk, and overall financial profiles.
The AWC indicated that the firm was cognizant of MB’s activities; particularly that MB effected low priced securities transactions in customer accounts which were not suitable for customers. The firm purportedly never acted upon the risks of MB’s activities by taking steps to make sure that the transactions he effected were appropriate for customers.
Moreover, in 2012, the firm met to discuss MB’s concentration of customers’ assets in low priced securities, wherein the firm’s compliance staff stated that MB’s transactions were not appropriate for customers and had led customers to maintain unsuitable investment concentrations in the low-priced securities. FINRA indicated in the AWC that MB’s supervisor, WG, never successfully implemented restrictions on MB’s activities. The firm reportedly neglected to further review MB’s activities at this point.
The AWC stated that compliance staff subsequently discussed MB’s unsuitable transactions in 2013, wherein WG was instructed to make sure that customers were apprised of MB’s activities in customers’ accounts. WG purportedly neglected to follow up with customers. Another compliance manager, JA, evidently failed to make sure that MB was placed on heightened supervision. The firm’s supervisory failures, according to FINRA, caused eighteen months of sales practice violations to have been committed. Consequently, the firm’s conduct in this regard was found by FINRA to be violative of FINRA Rules 2010 as well as NASD Rules 3010 and 3040(c)(2).
This is not the first time that WFG Investments, Inc. has been sanctioned for supervisory failures. Particularly, the firm was censured and fined $40,000.00 by FINRA based upon consenting to findings that it failed to adequately supervise its securities operations. Letter of Acceptance, Waiver and Consent, No. 2009016279101 (June 2012). The firm was found by FINRA to have violated NASD Rules 6230, 2440, 2110, 3010(b), as well as MSRB Rules G-27(c) G-8, and SEC Rules 17a-4(b), 17a-3(a), and 15c2-4.
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