ProEquities is a Birmingham, Alabama-based broker-dealer and is licensed to operate in 53 U.S. states and territories. In this article our dedicated investor protection lawyers highlight notable complaints that have been filed against Proequities (CRD#: 15708).
Proequities: Customer Disputes and Regulatory Actions
Failure to Supervise Non-Traditional ETF Sales
In August of 2016, Proequities was publicly censured and fines $200,000 for its failure to adequately supervise its representatives’ sale of non-traditional exchange traded funds (ETFs). Non-traditional ETFs are distinguished from standard ETFs because they have one of the following two characteristics:
- They are leveraged, meaning they seek a return that is a multiple of their benchmark; or
- They are inverse, meaning they trade the opposite direction of their benchmark.
The key thing to know about these financial products is that they come with additional risk. Of course, ETFs that are risky and complex are not suitable for most investors. In this case, the non-traditional ETFs that were sold by Proequities representatives were not suitable for the clients. FINRA determined that the brokerage firm did not have the proper supervisory system in place to ensure that individual brokers were actually making suitable investment recommendations.
Breakpoint Sale Violations
Under FINRA Rule 2342, registered brokerage firms have a legal duty to properly identify fund breakpoints so that they can look out for the best financial interests of investors.
A breakpoint is the level of investment at which a buyer gets a discount on the total fees and commissions. For example, a specific mutual fund may offer a sales discount to any investor who buys at least $10,000 in total shares. In this hypothetical case, a broker would be obliged to inform that investor of that breakpoint, so that they have the ability to take advantage of it, if they choose to do so.
Unfortunately, not all broker-dealers live up their responsibilities to look out for investors. In November of 2015, Proequities overcharged its customers, partially due to its failure to properly identify and apply breakpoints on Unit Investment Trusts (UITs).
In all, FINRA investigators determined that Proequities clients paid more than $109,000 in excess fees due to the firm’s negligence. As a result of the findings, the brokerage firm was ordered to pay full financial restitution to investors and a $165,000 fine.
Misrepresentation/Omission of Material Facts
In May of 2013, a FINRA arbitration panel based in Los Angeles, California awarded a Proequities customer $448,562.40 in financial compensation. The client in this case alleged several different causes of action against Proequities and its representative Mamdoh Aziz (Mark) Abas (CRD#: 1491900). Specifically, the customer alleged:
- Breach of fiduciary duty;
- Elder abuse;
- Negligent misrepresentation; and
- Outright fraud.
The dispute in this case was related to a real estate investment. Notably, while real estate feels tangible, and thus more ‘safe’, to many investors, it can actually be quite risky. Unfortunately, all too often, real estate is also used as a conduit for investment fraud schemes. Investors always need to keep their guard up and should be certain that their hard-earned assets have been placed into an appropriate investment.
Unsuitable Investment Recommendations
In May of 2011, a FINRA arbitration panel based in Atlanta, Georgia awarded more than a dozen of Proequities investors more than $1.4 million in total compensation. This case arose after a Proequities registered representative recommended unsuitable investments to many different investors.
Specifically, this representative recommended that investors put their money into a Georgia company called Advanced Asset Strategies. Not only was this investment opportunity unsuitable for many investors, but eventually, it became clear that Advanced Asset Strategies was actually a complex mortgage-based Ponzi scheme.
Real estate Ponzi schemes are a major problem. Unfortunately, real property, or the appearance of real property holdings, can be used as a ‘hook’ to draw in unsuspecting investors into fraud schemes. If you lost money because of a Ponzi scheme, you need to consult with a lawyer immediately.
At Sonn Law Group, we have considerable experience handling complex investment fraud claims. To schedule a free review of your claim, please call us today at 844-689-5754 or reach out to us directly through our website. Let us help you fight for every penny you are owed.