Securities Arbitration Lawyer Blog
Iorio Altamirano LLP is investigating claims on behalf of Triad Advisors LLC customers after the firm was censured and fined $150,000 by FINRA. The sanctions involve supervisory failures related to i) switches and short-term trading of A-share mutual funds in customer accounts and ii) variable annuity exchanges.
Triad Advisors LLC was also ordered to pay restitution of $43,998 plus interest to customers identified by FINRA.
If you have lost money with Triad Advisors LLC, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account.
Triad Advisors LLC has been a FINRA member since March 1990 and is headquartered in Atlanta, Georgia. The firm conducts a general securities business, is a registered investment advisor (RIA), and a licensed insurance agency. It had 936 registered representatives in 357 branch offices as of December 2020.
AWC Findings
Triad Advisors LLC and FINRA entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) on February 9, 2021, over FINRA’s findings that:
- Between June 2015 and July 2017, Triad failed to establish and maintain a reasonable supervisory system to achieve compliance with suitability requirements regarding switching and short-term trading of class A share mutual funds and failed to supervise such trading;
- Between June 2015 and December 2017, Triad failed to establish, maintain, and enforce a reasonable supervisory system and written supervisory procedures (WSPs) that were reasonably designed to identify possible inappropriate rates of VA exchanges; and
- Between June 2015 and December 2017, Triad failed to timely file disclosures in connection with written customer complaints and customer-related arbitrations. Additionally, Triad failed to timely update its registered representatives’ Uniform Application for Securities Industry Registration or Transfer Form (Form U4) to disclose reportable events. Triad also failed to timely update his Uniform Termination Notice for Securities Industry Registration Form (Form U5) to disclose reportable events.
Triad Advisors LLC Failed to Establish and Maintain a Reasonable Supervisory System to Monitor Short-Term and Unsuitable Switching of A Share Mutual Funds
Class A mutual fund shares generally include substantial upfront sales charges, known as “front-end loads.” These investments are typically suitable only as long-term investments and not for short-term trading. In fact, an investor must often hold the A-share for a long period of time to account for the front-end load.
“Switching” occurs when the customer sells mutual fund shares and reinvests the proceeds in another mutual fund. In doing so, the customer incurs additional charges and commissions. Frequent short-term purchases and sales of A-shares and switching in a customer’s account may be unsuitable because of the frequency of the transactions, costs incurred, the customer’s financial situation, investment objectives, and needs.
FINRA found that from June 3, 2015, through July 31, 2017, a Triad registered representative engaged in short-term, unsuitable purchases and sales and switching of A-share mutual funds in ten customer accounts. This resulted in $43,998 in customer losses in nine accounts.
The customers’ accounts all indicated an investment objective of capital appreciation, preservation of capital, and/or income. The customers all had an intermediate or long-term time horizon, yet all the accounts held A-share mutual fund positions for 12 months or less.
Triad Advisors LLC Failed to Establish, Maintain, and Enforce a Reasonable Supervisory System and WSPs to Monitor Variable Annuity Exchanges
Variable annuities allow customers to choose from a variety of contract features and options. They are complex products.
FINRA found that from June 2015 through December 2017, Triad failed to establish, maintain, and enforce a supervisory system and WSPs reasonably designed to monitor patterns of variable annuity exchanges and to determine whether any registered representatives engaged in high rates of variable annuity exchanges. Triad relied on two designated principals to supervise these activities.
The two principals had access to Triad’s variable annuity blotter, which failed to distinguish between variable annuity exchanges and replacements. From July 1, 2016, through June 30, 2017, Triad sold $743 million in variable annuities. These sales accounted for over 15% of Triad’s overall sales. Triad had 21,927 variable annuity exchanges during this period. This accounted for $199.4 million of the $743 million.
Because Triad’s blotter did not distinguish between exchanges and replacements from other variable annuity transactions, Triad was unable to monitor and reasonably supervise to determine whether there were any potentially inappropriate rates of exchange. As such, Triad failed to identify patterns or trends in variable annuity exchange transactions by the firm’s registered representatives.
Triad Advisors LLC Failed to Make Timely Disclosure Filings
FINRA members must meet certain regulatory requirements and make timely disclosure filings.
Between June 2015 and December 2017, Triad failed to timely file disclosures in connection with fifteen customer-related arbitrations that resulted in settlements greater than $25,000.
Triad also failed to timely report four written customer complaints. The complaints all related to one representative and revealed a pattern of misconduct by borrowing from customers away from the firm.
Additionally, Triad failed to timely update its registered representatives’ Form U4s to disclose reportable events in six instances related to arbitration filings and settlements.
Finally, Triad failed to timely update former registered representatives’ Form U5s to disclose reportable events in ten instances. In four of the ten instances, Triad failed to timely update two former representatives’ Forms U5s to disclose that they were subjects of arbitration claims. In the other six instances, Triad failed to timely update the applicable Forms U5, where former Triad registered representatives were the subject of arbitration settlements of more than $15,000.
Our Firm
If you have lost money with Triad Advisors LLC, contact New York securities 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. A FINRA restitution order does not preclude investors from pursuing their own claims to seek restitution or other available remedies. Investors harmed by Triad’s supervisory failures may have a claim against the firm.
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.