FINRA barred John Scott Simoncic, formerly of Financial West Group (Reno, Nevada and San Diego, California) and Securities America (Solana Beach, CA), for churning customer accounts, engaging in excessive trading, and making unsuitable recommendations regarding non-traditional exchange-traded funds (ETFs), including leveraged and inverse ETFs such as the volatility-linked ProShares Ultra VIX Short-Term Futures ETF (UVXY).
The findings state that while associated with Financial West, Simoncic (CRD #1062932) engaged in the manipulative, deceptive, and fraudulent device known as churning, which occurs when a broker excessively trades a customer's account with an intent to defraud or reckless disregard for the customer's interests.
The report indicates that Simoncic exercised de facto control over a senior citizen customer's IRA account whose investment objective was preservation of capital with a conservative risk tolerance. While in control, Simoncic purportedly decided which specific securities to transact, including quantities and timing of purchase and sales, and that Simoncic's customer "relied completely" upon him to manage her IRA.
FINRA determined that Simoncic's trading in his clients' account was excessive, racking up nearly $80,000 in total commissions and fees while causing his customers to sustain over $100,000 in losses. In one case, an elderly client of Simoncic's sustained a complete loss of her IRA retirement savings—FINRA found that Simoncic bought and sold the same securities in her account multiple times over a short period, including gold, mining, and oil stocks.
FINRA specifically identified the non-traditional volatility ETF ProShares Ultra VIX Short-Term Futures (UVXY) and the double-leveraged ETF ProShares UltraShort S&P 500 (SDS) as two examples of unsuitable ETF trades that produced losses for Simoncic's customers.
In February 2018, ProShares Ultra VIX Short-Term Futures (UVXY) appeared in a list of volatility ETPs with the worst one-year returns. At the time, UVXY had lost 79.87% of its value, just behind ProShares Short VIX Short-Term Futures (SVXY), VelocityShares Daily 2x VIX ST ETN (TVIX), REX VolMAXX Short VIX Weekly FutsStrat ETF (VMIN), and Credit Suisse's VelocityShares Daily Inverse VIX ST ETN (XIV), whose one-year return at the time was -90.94%.
With FINRA concluding that Simoncic's excessive trading of UVXY was unsuitable for a customer whose listed risk tolerance was conservative—regardless of Simoncic's fraudulent churning misconduct—the regulator's summation could be deemed a significant understatement.
After all, one of Simoncic's customers lost her entire IRA retirement savings after Simoncic excessively traded a handful of securities in her account, one of which was UVXY.
If you have invested with John Scott Simoncic or with any broker or financial adviser who has excessively traded, churned, or unsuitably recommended trades in your investment account of complex securities, such as ETFs and other inappropriate products with unacceptably high levels of risk that were not in concert with your investment objectives or moderate/conservative risk tolerance preferences, such as the ill-fated volatility exchange-traded products including UVXY, and this illicit activity has subsequently proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for investigation and consultation.