FSC Securities Corp. has agreed to pay a $100,000 fine and repay clients $492,000 to settle a Finra case over sales of non-traditional ETFs.
Finra, which signed off on the settlement Thursday, alleged that FSC did not adequately supervise the sale of leveraged and inverse ETFs from January 2009 through September 2014. During that time, FSC clients made 6,500 purchases worth approximately $92 million in 1,400 accounts, Finra said in a settlement document.
FSC stopped selling 3X leveraged ETFs in late 2009 after Finra issued a warning about non-traditional ETFs being held for more than a day, but the firm continued to allow the sale of 2X and less levered products, Finra said.
But from January 2009 to May 2012, FSC “failed to develop any system or procedure to monitor, review or evaluate the length of holding periods,” the settlement document says.
In May 2012, FSC began to monitor holding periods, but supervisors were given no guidance on how to evaluate the risks of long-term holdings, Finra said.
A spokesman for the Advisor Group, which owns FSC, declined comment.