FINRA Fine for VA Redemptions

On Jul. 16, FINRA fined Cambridge $150k on redemption of VAs.

  • Cambridge Investment Research fined for redemption of VA, leveraged ETFs.

Alleged Violations

  • Customers redeemed VAs, and moved their proceeds to an advisory account.
  • Employees were involved with, and recommended some of the transactions.
  • No systematic supervision or record of redemption or procedures for doing.
  • Firm did not find out which of the transactions were recommended by their
    associated persons and were thus subject to FINRA suitability requirements.
  • Non-traditional ETFs traded by the representatives, in retail client accounts.
  • 84 registered representatives, executed 4,773 transactions, totaling $127m.

Attestation Procedures

  • Procedures required registered representatives who wanted to trade ETFs to
    attend training, and sign leveraged/inverse ETF rep/advisor attestation form.
  • Form required representatives to represent before executing ETF transaction.
  • Firm failed to enforce WSPs regarding non-traditional ETFs in certain respects.
  • Allowed reps to execute non-traditional ETF trades before signing attestation.
  • All 84 representatives who executed non-traditional ETF transactions for firm,
    executed at least one such transaction before signing-off the attestation form.

Non-traditional ETFs

  • Firm allowed customers to buy non-traditional ETFs before giving disclosures.
  • Did not establish an supervisory system to effectively monitor holding period.
  • Procedures required compliance to review customer account and identify any
    accounts that held these position for over 10 days and if necessary follow up
  • Firm failed to enforce, customers held such ETF positions for lengthy periods.
  • Numerous non-traditional ETF positions, sold by customers, held over 7 days.