According to records provided by the Financial Industry Regulatory Authority (FINRA), New York-based brokerage firm American Portfolios Investment Services has been sanctioned for alleged unsuitable mutual fund switching. The securities and investment fraud law firm Fitapelli Kurta is investigating allegations of misconduct against American Portfolios Investment Services (CRD# 18487).
According to FINRA, two of American Portfolios Investment Services’ registered representatives recommended 78 unsuitable mutual fund switches in 15 customer accounts, causing their clients to received approximately $91,000 in “unnecessary sales charges,” violating NASD Conduct Rule 2310 and FINRA Rules 2111 and 2010.
Certain FINRA informational materials state that “trading in mutual fund shares, particularly on a short term basis, may constitute a violation of the responsibility for fair dealing.” Mutual fund shares, according to FINRA, are usually suitable as long-term investments, but the transaction fees and commissions associated with short-term switches may not be suitable for customers.
According to FINRA’s complaint, American Portfolios Investment Services additionally “lacked adequate systems and procedures to monitor for unsuitable fund switching,” and that although it established a switch alert in 2012, it failed to ensure that supervisors “took appropriate steps to investigate those alerts.” As a consequence of this, the firm did not follow up on red flags triggered by the registered representatives in question.
Among these red flags, according to FINRA, were: “the two registered representatives placed their customers exclusively into Class A mutual fund shares with significant upfront costs to customers; the commissions earned by the two registered representatives were high; many of the customers to whom one of the registered representatives recommended switch transactions were elderly; and neither of the two registered representatives obtained switch letters from customers acknowledging their understanding of the consequences of the above switch transactions.”
American Portfolios Investment Services has signed a letter of Acceptance, Waiver and Consent agreeing to a censure and a fine of $50,000. According to the firm’s BrokerCheck report, it is the subject of three other sanctions.
In 2013 FINRA sanctioned American Portfolios Investment Services following allegations the firm failed to timely deliver required investment prospectuses or written descriptions for exchange traded fund and unit investment trust purchases. American Portfolios Investment Services was censured and issued a fine of $25,000.
In 2010 FINRA sanctioned American Portfolios Investment Services following allegations the firm failed to transmit reportable order events to the Order Audit Trail System. The firm was censured and issued a fine of $5,000.
In 2006 the National Association of Securities Dealers (NASD) sanctioned American Portfolios Investment Services following allegations the firm failed to timely report municipal securities transactions and failed to adopt, maintain, and enforce written supervisory procedures designed to ensure compliance with such. The firm was censured and issued a fine of $7,500.
If you have lost money investing with American Portfolios Investment Services, you may be entitled to recover your losses. Call the securities and investment fraud law firm Fitapelli Kurta at 877-238-4175 for a free consultation. Fitapelli Kurta takes every case on a contingency basis, which means Fitapelli Kurta only gets paid if and when you collect money. By law there may be a limited window to file your claim, so we recommend you avoid delay. Call 877-238-4175 now to speak to an attorney for free.