FINRA ordered J.P. Turner & Company, LLC to pay $707,559 in restitution to 84 customers for unsuitable leveraged and inverse exchange-traded fund ("ETF") sales and for excessive mutual fund switching.
According to the investigation, JP Turner engaged in violative conduct by failing to establish and maintain supervisory systems related to leveraged and inverse ETF sales by managing these more complex products in the same way JP Turner supervised simpler traditional ETFs.
FINRA explains that because leveraged and inverse ETFs "reset" daily, these products are complex and may be hazardous to long-term investors.
The FINRA findings state that as a result of its failure to supervise, JP Turner allowed registered representatives to recommend and market the complex leveraged and inverse ETFs without first performing reasonable due diligence and without taking steps to understand the risks associated with these more complex products.
FINRA discovered that accordingly, "many" firm customers held the complex leveraged and inverse ETFs for several months. Investigators also determined that JP Turner failed to consider suitability for at least 27 customers including elderly retirees and those with conservative investment objectives, resulting in net losses exceeding $200,000.
The investigation states that these failures additionally were magnified by a pattern of unsuitable mutual fund switching in which JP Turner's failure to supervise contributed to a failure to detect several red flags and allow over 2,800 mutual fund switches that the firm should have rejected, resulting in 66 customers paying commissions and sales charges of more than $500,000.
If you have invested with JP Turner & Company, LLC or with any other firm whose failure to supervise, conduct due diligence on complex products such as leveraged and inverse ETFs, unsuitable sales or recommendations or excessive fund switches or trading has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.