SunTrust Investment Services agreed to pay $634,000 in fines and restitution to settle charges it failed to establish, maintain, and enforce adequate supervision with respect to exchange-traded fund (ETF) sales dating back to 2015, resulting in significant customer losses.
In AWC #2018057530701, investigators wrote that the Atlanta, GA-based SunTrust failed in its supervisory responsibilities for non-traditional ETFs, including deficiencies in its written supervisory procedures (WSP) documents.
FINRA described the leveraged and inverse ETFs as "typically not suitable for retail investors who plan to hold them for more than one trading session, particularly in volatile markets."
Despite this warning, which FINRA issued several times to industry broker-dealers, SunTrust purportedly failed to have "any" systems in place to monitor holding periods for non-traditional ETFs and SunTrust brokers allegedly failed to conduct customer-specific suitability analyses for ETF positions held longer than one day.
The report indicates SunTrust executed 252 solicited ETF transactions totaling over $2.8 million in principal amount, resulting in at least $584,466.13 losses in 95 SunTrust customer accounts.
FINRA tacked on a $50,000 fine for the supervision and suitability failures, bringing SunTrust's total financial penalty to $634,466.13.
SunTrust is hardly the only firm regulators have cited for ETF supervision failures and unsuitable ETF recommendations. In February 2020, the SEC ordered Wells Fargo Advisors and Wells Fargo Clearing Services to pay a $35 million penalty for supervisory, training, and suitability failures relative to inverse ETF recommendations, which resulted in customer losses totaling several millions of dollars.
Additional ETF misconduct and discipline may be found in our Securities Fraud Blog ETF category.
If you have invested with SunTrust Investment Services or with any broker or financial adviser who unsuitable recommended you invest in a non-traditional or complex exchange-traded fund, such as leveraged or inverse ETFs, and you have suffered losses or other damages as a result of holding the risky product "for more than one trading session," as FINRA previously warned firms about, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.