Sanctuary Fined Over Supervisory Failures
From the Desk of Jim Eccleston at Eccleston Law:
Sanctuary Wealth has agreed in a settlement to pay at least $530,000 in fines and restitution over the firm’s supervisory failures. According to the Financial Industry Regulatory Authority (FINRA) settlement, Sanctuary failed to effectively supervise certain product sales and oversee advisors’ outside business activities. According to a Letter of Acceptance, Waiver and Consent (“AWC”), Sanctuary was fined $160,000 and ordered to pay $370,161.39 plus interest in restitution for supervisory failures that date back to 2014.
Between January 2014 and December 2018, Sanctuary failed to “address the unique features and risks” related to sales of leveraged and inverse ETFs as required by FINRA Rule 2111, according to the letter. Nearly 30 advisors recommended clients that purchase around $5 million worth of non-traditional ETFs, which resulted in “significant” net losses for certain customers. Nevertheless, the firm earned at least $60,000 in commissions related to 600 purchases in nearly 150 client accounts.
Sanctuary allegedly also failed to have a “reasonable” system in place to oversee the suitability of non-traditional ETF recommendations provided by advisors. Between January 2017 and January 2019, Sanctuary additionally failed to review and analyze the outside business activities of at least 15 affiliated advisors, according to FINRA. Sanctuary violated Rule 3720, which requires advisory firms to evaluate whether an outside business activity (OBA) may conflict with an advisor’s fiduciary obligations to the client.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, regulatory and disciplinary matters.
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