FINRA Takes Disciplinary Action Against New Jersey Financial Adviser
The Financial Industry Regulatory Authority (FINRA) recently suspended Alex Etter for two years for misconduct he committed while he was a registered financial adviser. According to investigators, Etter put his personal financial interests and the interests of his firm ahead of that of his clients. In doing so, his brokerage company netted more than $1 million in commissions and investment fees. This was achieved by recommending that his clients engage in wholly unsuitable investment strategies. Alex Etter consented to the findings without admitting to or denying any wrongdoing in the case.
Etter’s Company Hard Sought Commission Payments
Financial advisers and broker-dealers have a legal duty to represent the best interests of their clients. Unfortunately, Alex Etter’s company, Etter Group Corporation (EGC), failed to live up to this obligation. As a result, his clients suffered serious financial losses. In 2011, EGC, a small firm, began to rapidly expand its client base. As part of its expansion, the company became a branch of Caldwell International Securities Corp. During this expansion, Etter brought aboard three new registered financial advisers. Each of these advisers joined the brokerage firm as an independent contractor. Additionally, each adviser was paid exclusively based on commissions related to the buying and selling of securities. Clearly, an incentive was established at the firm to increase trading within customer accounts. Specifically, EGC sought out customers who were willing to agree to mark that the ‘purpose’ of their trading account was ‘speculation’. As such, Alex Etter reasoned that every type of investment was suitable for these customers. Etter proceeded to recommend all of these customers an extremely active and experienced trading strategy.
Customer Account Value Was Being Eaten Away Through Active Trading
Of course, an active trading strategy results in more commissions for the firm. Even if an account is designed for ‘speculation’ it does not mean that every possible trade in suitable for it. From the 2012 through 2014, customer accounts at EGC often purchased and sold multiple single securities within the same month, and sometimes even within the same week. Shockingly, EGC raked in commission payments as high as 4 or 5 percent on each individual transaction. This is a truly extreme figure which makes it nearly impossible for a customer account to turn a profit over the long-run. In essence, the firm was churning customer accounts. The net result of this activity was that customer accounts were slowly losing value while the firm continued to take in big time commission payments and profits. To put it in another perspective, FINRA investigators found many instances where EGC clients made a successful trade (one that made money) but their account actually lost value because the commission fee was higher than the total profit.
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If you have been the victim of investment fraud in the Miami area, the experienced attorneys at Carlson & Associates, P.A. are ready to help. Our firm has a proven track record of success and we are ready to fight hard to help you seek the full and fair compensation you rightfully deserve. Please do not hesitate to contact us today to request your fully confidential initial legal consultation.
Resource:
disciplinaryactions.finra.org/Search/ViewDocument/66718