Finra Bars Former Rep over Trades in Non-Traditional ETFs
Self-regulator Finra has barred a former America Northcoast Securities broker for alleged unsuitable trading in non-traditional ETFs, the industry organization says.
From May 2015 to April 2016, Dominic Tropiano allegedly recommended 866 trades in non-traditional ETFs, which use swaps, futures contracts and other derivatives to leverage their performance or short the underlying index and benchmark and are mostly designed to achieve their stated objectives only on a daily basis, according to a letter of acceptance, waiver and consent published by Finra. Tropiano allegedly lacked an understanding of their complex features and risk but recommended them to at least 47 customers of America Northcoast without having any reasonable basis to believe that they would be suitable for them, the regulator says. In addition, Tropiano allegedly also caused several transactions in two clients’ accounts to be carried out without their knowledge or consent, according to Finra.
Tropiano also allegedly engaged in securities business without being registered, the regulator says. He had been registered with Key Investment Services from July 2008 to April 2015 and then became a nonregistered associated person with America Northcoast in May of that year, according to the letter of consent.
Tropiano’s brother-in-law, identified by Finra only as “C.B.," was the president and chief compliance officer at America Northcoast, the regulator says.
C.B. allegedly told Tropiano to refer Key Investment clients who asked Tropiano for a referral to a different broker-dealer to bring them to America Northcoast, and from May 2015 to April 2016, at least 47 of the clients opened accounts with America Northcoast, according to the consent letter.
Tropiano also allegedly provided investment advice and solicited the 866 trades in non-traditional ETFs while he wasn’t actually registered at America Northcoast, Finra says.
The regulator barred Tropiano from the industry but didn’t order any restitution, as America Northcoast paid around $1.5 million to its clients for losses resulting from Tropiano’s alleged recommendations of the non-traditional ETF transactions, according to the consent letter. Tropiano didn’t admit nor deny Finra’s findings in agreeing to the bar, the regulator says.