SunTrust Investment Services to Pay $634K For Alleged Inadequate Supervision Of Unsuitable ETF Sales Practices

FINRA Accuses SunTrust Investment Services of Failing to Properly Supervise Brokers

The Financial Industry Regulatory Authority (FINRA) has ordered SunTrust to pay $634K to settle charges accusing the broker-dealer of not properly supervising 17 of its brokers when they recommended that customers hold non-traditional exchange-traded funds (ETFs) for long periods–a practice that can lead to losses especially when there is market volatility. 

Of this settlement, $50K is a fine and $584,466 is restitution. SunTrust Investment Services, which is owned by Trust Bank, agreed to the sanctions but without denying or admitting to the self-regulatory organization’s (SRO’s) findings. 

If you are an investor who has suffered ETF losses and it was a SunTrust broker that recommended you invest and hold nontraded ETFs for extended periods, you may have grounds for a brokerage firm negligence claim. 

Contact our nontraded ETF fraud lawyers at Shepherd Smith Edwards and Kantas (SSEK Law Firm) today. We represent investors nationwide. 

Customers Ended Up Holding Nontraded ETFs for Too Long, Suffered Losses

FINRA contends that from 1/2015 through 1/2018, SunTrust did not put into place or enforce a supervisory system or written supervisory procedures or policies that would’ve detected when complex ETFs tied to an underlying index, or its inverse, were sold to customers.

As a result of these allegedly unsuitable sales practices, 30 customer accounts ended up holding ETFs for around over 1,130 days and 57 accounts held investments for 90 days. Collectively, 95 customer accounts suffered $584,466 in losses. 

Ideally, most nontraditional ETFs should only be held daily. Both FINRA and the US Securities and Exchange Commission (SEC) has cautioned against doing otherwise. Also, complex nontraded ETFs are not suitable for inexperienced investors. 

These investment losses didn’t have to happen. In 2016, SunTrust began barring brokers from buying, selling, or trading nontraditional exchange-traded funds but, according to FINRA, neglected to address over 300 existing positions, of which some had already sustained substantial losses. 

Get Support From Our Failure to Supervise Lawyers

Broker-dealers have a duty to properly supervise their brokers and make sure there is a supervisory system and written rules in place that are being reinforced to prevent, detect, or stop unsuitable sales practices, fraud, or negligence from occurring. 

SSEK Law Firm represents investors against negligent broker-dealers and their registered representatives. Contact our ETF fraud attorneys so that we can help you explore your legal options.