Securities Arbitration Lawyer Blog
Iorio Altamirano LLP is investigating claims on behalf of customers of Calton & Associates, Inc. after the firm was censured, fined $250,000, and ordered to pay $472,007 in restitution to harmed investors by FINRA.
The sanctions involve supervisory failures between February 2014 and February 2020 related to suitability obligations connected with the sale of non-traditional and volatility-linked exchange-traded products (ETPs). Non-traditional and volatility-linked ETPs are complex products intended to be held for short periods of time as part of a trading strategy rather than as buy-and-hold investments. Although the firm was aware of the complex nature of the products, Calton permitted its representatives to offer the products to retail customers without a reasonable supervisory system to properly understand the products’ features and risks and review and monitor transactions. Consequently, Calton representatives recommended non-traditional and volatility-linked ETPs to retail customers without understanding the products were intended for short-term trading rather than as buy-and-hold investments, and the firm’s customers held the products for longer periods of time, resulting in losses.
In addition, during the period from January 1, 2014, to June 21, 2018, Calton failed to offer retail customers educational materials prior to their first purchases of collateralized mortgage obligations (CMOs), and it failed to establish, maintain, and enforce a supervisory system, including written supervisory procedures (WSPs), reasonably designed to achieve compliance with FINRA rules.
Further, the firm unreasonably assigned an individual to supervise a registered representative despite the presence of a conflict of interest, and it allowed a non-registered person to accept and enter securities orders.
If you have lost money investing with Calton & Associates, Inc., contact securities arbitration law firm Iorio Altamirano LLP for a free and confidential evaluation of your account.
FINRA Letter of Acceptance, Waiver, and Consent (“AWC”)
Calton & Associates, Inc. has been a FINRA member since 1987. It is a full-service brokerage with its main office located in Tampa, Florida. The firm has approximately 390 registered representatives and 160 branch offices.
The firm and FINRA entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) on May 17, 2021, over the following findings:
- From February 2014 to February 2020, Calton’s supervisory systems, including its WSPs, relating to the sale of non-traditional and volatility-linked ETPs were not reasonably designed to achieve compliance with the firm’s suitability obligations under FINRA Rule 2111.
- From February 2014 to February 2020, Calton failed to conduct reasonable diligence to understand the features and risks of non-traditional and volatility-linked ETPs before allowing representatives to offer non-traditional and volatility-linked ETPs to customers. As a result, the firm’s representatives sold non-traditional and volatility-linked ETPs to customers without understanding the products’ features and risks, including that such products were only meant to be held on a short-term basis. One of the consequences was that many customers held non-traditional and volatility-linked ETP positions for longer periods of time, thereby incurring losses.
- From January 1, 2014, to June 21, 2018, Calton sold CMOs to hundreds of non-institutional customers through at least 33 registered representatives. During the same period, Calton failed to offer non-institutional customers who purchased CMOs with the educational material required by FINRA Rule 2216(b)(2).
- From January 1, 2014, to June 21, 2018, the Firm’s WSPs set forth the requirement that the firm offers educational materials to non-institutional CMO customers, pursuant to FINRA Rule 2216(b)(2). However, the WSPs did not set forth any procedure for complying with Rule 2216(b)(2) or identify any supervisor responsible for achieving compliance with the rule.
Calton & Associates, Inc.’s Supervisory Violations
Financial institutions must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed supervisory system to ensure that products are suitable for particular customers. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.
The AWC describes several supervisory failures by Calton & Associates, Inc.
How to Recover Losses or Obtain a Free Consultation
If you have lost money with Calton & Associates, Inc., contact FINRA arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at august@ia-law.com, jorge@ia-law.com, or toll-free at (855) 430-4010 for a free and confidential evaluation of your account.
Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. We pursue FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.