FINRA censured Newbridge Securities and fined the firm $225,000 for failing to adequately supervise complex securities transactions, including the sale structured notes and leveraged, inverse, and inverse-leveraged exchange-traded funds, collectively known as non-traditional ETFs.
For instance, one firm policy indicated that representatives were not permitted to solicit orders of certain structured products known as non-principal protected notes from customers 70 years of age or older, but investigators alleged that Newbridge failed to establish any supervisory systems or procedures to ensure that its principals (or supervisors) were reviewing for compliance with this policy.
In AWC #2016047569601, investigators wrote that Newbridge representatives solicited 976 retail customers to invest $96.9 million in structured products, of which $54.9 was invested in non-principal protected structured notes, most commonly steepeners.
FINRA also wrote that Newbridge Securities failed to have a reasonable basis to recommend the sale of a private placement offering because the firm failed to conduct reasonable due diligence on that product. FINRA additionally fined Newbridge broker Bruce Howard Jordan (CRD #1223556) for his failure to supervise the sales and for allowing Newbridge to rely on due diligence conducted by the issuer of the offering, instead of doing the due diligence or research for itself.
The report specifically named the CJS Technology Select Fund LLC I (CJS Fund I) as a private offering sale that Newbridge purportedly failed to adequately supervise. Investigators also implicated Newbridge stockbrokers' sales of non-traditional ETFs—an especially risky product in volatile markets—as another such transaction running afoul of supervisory requirements.
FINRA wrote that the firm failed to detect at least 95 prohibited non-traditional ETF trades because the firm purportedly failed to update its surveillance system with new non-traditional ETF symbols that would have merited further review. FINRA found that customers held at least 58 of these 95 solicited non-traditional ETFs for a period of two years of more.
According to FINRA's documentation and guidance, non-traditional ETFs are typically not suitable for retail investors to be held for longer than one trading session.
If you have invested with Newbridge Securities or with any firm, broker, or investment adviser whose failure to supervise sales of a complex product such as a non-traditional ETF, or whose solicitation in a non-principal protected structured notes itself violated a firm policy that may have prohibited such solicitation, and this has proven harmful to your investments or interests, 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.