FINRA censured, fined, and ordered restitution payments from Philadelphia, Pennsylvania based Janney Montgomery Scott last month. The Letter of Acceptance Waiver and Consent (AWC) discussed how two of Janney’s advisors “recommended that 11 customers unsuitably concentrate their accounts in certain energy-sector securities, including master limited partnerships focused on the exploration or development of natural resources” in violation of the FINRA Suitability Rule, 2111. This subjected the customers to a high risk of loss if oil and gas prices declined.
The AWC discussed the fact that Janney’s supervisory system red flagged these concentrations, but Janney “failed to take reasonable steps to understand the potential risks and rewards.”
In addition to being censured by FINRA, Janney was fined $100,000 and ordered to pay restitution to the customers that had not yet received restitution in the total amount of $145,019.
Concentration of customer accounts in one sector such as energy, or in multiple master limited partnerships (MLPs), can result in an unsuitable risk in customer accounts, and also may violate Regulation Best Interest (Reg BI). Firms such as Janney are required to have in place reasonable systems to supervise their advisors and accounts to attempt to prevent such violations.
If you have lost monies resulting from unsuitable overconcentration in a single sector, in oil and gas, or in unsuitable MLPs, we may be able to help. Please contact our securities fraud lawyers at Greco & Greco for a free attorney consultation.