The Texas State Securities Board is ordering William H. Lowell, the president of Lowell & Co., to pay a $40K fine after he allegedly failed to properly supervise one of his firm’s ex- financial representatives. The formerly registered broker and investment advisor, Jody Bryant Bowers, allegedly lost nearly all of the assets in two client accounts after holding onto an exchange traded fund (ETF) for too long.
According to the state’s disciplinary order, Bowers bought and sold Proshares Ultra VIX Short-Term Futures ETF (UXVY) shares, which she “exclusively” traded in in the accounts of certain clients. This type of fund makes money through S&P 500 Index volatility, benefiting when there is a drop in the index.
Because the UXVY ETF is a leveraged exchange-traded fund that is a high-risk and costly investment, it is intended for short-term trading and must be monitored every day. However, Bower allegedly disregarded the warnings that were in the ETF’s prospectus and proceeded to hold on to positions in UVXY in two client accounts for too long, including 11,000 shares in one client’s account that were held there for 987 days. This caused the loss of 93% of that client’s initial investment. Bower also allegedly held on to 2,000 UXVY shares in another client’s account for 356 days, causing a 93% loss on the initial investment.
While Bower handled both client accounts out of Abilene, Tx, Lowell remotely supervised her out of Lubbock. The state contends that while Lowell “reviewed” Bower’s trading activities on a daily basis, he did not properly review monthly account statements for the “discretionary investment accounts” that the ex-Lowell &Co. broker supervised.
Lowell also purportedly failed to set up supervisory controls to properly oversee activities taking place in these accounts. This lack of oversight is the reason the state has cited for why Lowell failed to detect the longer holdings periods involving the UXVY ETF that eventually resulted in the client losses.
According to Bower’s BrokerCheck Record, Bower has worked 11 years in the securities industry She was registered with Lowell & Co. for four years until last year. Previous to that she was registered with Sagepoint Financial, First Heartland Capital, and Merrill Lynch, Pierce, Fenner, & Smith. Bower was fired from First Heartland after allegations of selling away, including engaging in outside business activities without the firm’s acknowledgement or approval. She disputes the allegations.
There have been two customer complaints against Bower, including one, alleging unsuitability and overconcentration that was settled for $375K. Another investor claim, still, pending alleges misrepresentations and improper investment recommendations.
Inadequate Supervision
Time and again, failure to properly supervise a broker or investment adviser has led to substantial investment losses for investors. Investment advisory firms and broker-dealer must put into place the proper supervisory procedures, not just in writing but also through execution, in order to properly oversee the activities of its employees.
Even representatives that are considered “independent contractors” and/or who work remotely must be properly supervised. They also must have undergone the proper training to do their job properly, including how to trade in different kinds of investments.
If you suffered losses due to broker fraud or investment adviser negligence, you may have reasons for pursuing an investor claim not just against your financial adviser but also against the firm that they are registered with. Contact Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) today to speak with an experienced Texas investment advisor fraud attorney. Our ETF fraud lawyers work with investors throughout Texas and the US.