Ameriprise Financial Services Inc. has agreed to pay a $100,000 fine to the Financial Industry Regulatory Authority (FINRA) after allegations that the company failed to supervise closed-end fund sales resulting in unsuitable short-term trading, according to the settlement agreement.
The fine stemmed from an employee who wrongfully recommended short-term trading of closed-end funds (CEFs) after they were bought at the IPO. According to FINRA, Ameriprise did not have a system in place to prevent the employee’s actions from taking place. The employee has been fired.
FINRA claimed that Ameriprise knew that CEFs purchased at an IPO were more suitable for long-term investment and that the sales charges applied to the short-term trading were unsuitable. Despite that, Ameriprise did not have a procedure in place to prevent the trades from going through. Ameriprise’s lack of oversight violated NASD Rule 3010.
CEFs are a type of pooled investment that offer a fixed number of shares in an IPO and then are traded on an exchange. Ameriprise began selling CEFs in 2010. The firm had guidelines in place regarding short-term trading, but it failed to have a system to prevent these types of transactions. In fact, on at least two occasions supervisors flagged customer accounts with short-term CEF trading but no action ever was taken.
The $100,000 fine came after FINRA determined that Ameriprise identified the short-term trading, investigated the trades, and then fired the individual who was recommending the short-term CEF trades.
Call a Los Angeles Securities Fraud Attorney Today
If your Ameriprise broker made short-term trades with your closed-end funds, you may have certain legal rights that require your immediate attention.
Contact an experienced Los Angeles securities fraud lawyer today for a consultation to discuss your rights and options.