Securities America Advisors Settles SEC Charges Related to the Sale of Volatility-Linked Exchange-Traded Products

From the Desk of Jim Eccleston at Eccleston Law LLC:

Securities America Advisors, Inc. has agreed to settle charges brought by the U.S. Securities and Exchange Commission (“SEC”). The SEC alleged that Securities America failed to adopt and implement policies and procedures reasonably designed to prevent unsuitable investments in volatility-linked exchange-traded products (“ETPs”). According to SEC, the violations occurred between January 1, 2016 and February 28, 2018.

According to an Order entered by the SEC, Securities America advisors recommended that clients buy and hold securities called the VelocityShares Daily Inverse VIX Short Term ETNs (“XIV”) and the ProShares VIX Short-Term Futures ETF (“VIXY”). According to the SEC, Securities America knew that some of its advisors were recommending that clients invest in XIV and VIXY and hold the products for extended periods. The SEC further alleged that Securities America failed to provide its advisors with the training necessary for them to have an adequate basis to recommend ETPs. The SEC found that between 2016 and 2018, Securities America clients held XIV and VIXY for an average of 32 days, causing those clients to incur significant losses.

As part of the settlement, Securities America was ordered to pay a civil penalty of $600,000, disgorgement of $3,399.42, and prejudgment interest of $377.40. The SEC also ordered that a Fair Fund be created, in which investors who lost money as a result of Securities America’s violations could be compensated from the monetary sanctions paid by the firm. Securities America consented to the entry of the SEC’s Order without admitting or denying the findings made in the Order.

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Tags: eccleston, eccleston law, sec, ETPs