Owner of Former New York Brokerage Firm K.C. Ward Financial Consents to FINRA Sanctions for Failing to Supervise Representatives Making Unsuitable RecommendationsFriday, January 3, 2020
On December 9, 2019, the Financial Industry Regulatory Authority (FINRA) Department of Enforcement approved a Letter of Acceptance, Waiver and Consent (AWC) submitted by Louis Ward, a registered representative with Spartan Capital Securities, LLC in Ronkonkoma, New York since January 2018.
According to his FINRA BrokerCheck report, Ward was previously associated with K.C. Ward Financial as a General Securities Representative, Investment Banking Representative, and Operations Professional various periods throughout his time with the firm from February 2008 to December 2017 when the firm closed down. Ward was also the majority owner and chief executive officer of K.C. Ward and was responsible for reviewing the firm’s daily transactions, including the suitability of those transactions.
FINRA staff claims in the AWC that from June 2010 to May 2017, Ward failed to supervise three K.C. Ward registered representatives, ignoring multiple red flags concerning unsuitable trades in customer accounts. Rather, Ward believed that suitability is “between the rep and the customer,” thus he did not personally review the trading in accounts for suitability, nor did he direct the principals to review them. If a customer’s account appeared on the Active Account Worksheet, which included any account that generated over $1,000 in commissions or at least five trades during the preceding month, for nine consecutive months, Ward would call a customer himself. In these calls, however, he typically limited the discussion to whether the customer knew about the trading in his or her account.
In one example, an unsupervised representative sold all or nearly all of a senior customer’s retirement assets in large, dividend-issuing, blue-chip stock and charged the customer $28,300 in mark-ups and mark-downs within a two-month period. The customer lost approximately $18,561. This representative alone cost his customer approximately $376,000 in mark-ups, mark-downs, and transaction costs, $127,000 in dividend payments and the customer suffered trading losses totaling $72,000 from three round-trip transactions. The other two representatives carried out similar unsuitable trades in which, FINRA claims, Ward did not reasonably supervise.
Based on the foregoing, Ward violated NASD Rule 3010 and FINRA Rule 3110 and 2010. Without admitting or denying the allegations made against him, Ward consented to a six-month suspension from associating with any FINRA member firm in any principal capacity, to pay $10,000 fine, and to complete 40 hours of continuing education concerning supervisory responsibilities by a third party acceptable to FINRA.
Oftentimes brokerage firms can be held liable for the brokers’ misconduct if they failed to supervise them while registered at the firm. If you invested and lost money due to broker misconduct, you may be able to recover from the broker or the brokerage firm. Since 1998, the experienced attorneys at ChapmanAlbin LLC have been fighting for victims of investment fraud and broker misconduct. Call us today at 1-877-410-8172 for a free consultation.