FINRA Fines Triad Advisors Over Supervisory Failures
The Financial Industry Regulatory Authority has issued a $150,000 fine to Triad Advisors, a wealth management firm within the Advisor Group network, for failing to supervise short-term trades of Class A share mutual funds and monitor inappropriate rates of variable annuity exchanges.
The Financial Industry Regulatory Authority has issued a $150,000 fine to Triad Advisors, a wealth management firm within the Advisor Group network, for failing to supervise short-term trades of Class A share mutual funds and monitor inappropriate rates of variable annuity exchanges.
The broker-dealer was also accused of failing to make timely disclosure filings relating to customer-related arbitrations and customer complaints. In addition to the fine, Triad agreed to pay its affected customers nearly $44,000 in restitution, plus interest.
FINRA claims that the alleged violations occurred between June 2015 through mid- and late-2017, prior to Advisor Group’s 2020 merger with Ladenburg Thalmann Financial Services, the former owner of Triad.
Triad is headquartered in Atlanta and had 936 registered representatives in 357 branch offices, as of December 2020.
According to a letter of acceptance, waiver and consent issued by FINRA, Triad failed to establish and maintain a reasonable supervisory system to achieve compliance with suitability requirements related to switching and short-term trading of Class A share mutual funds and failed to supervise this type of trading.
Class A mutual fund shares typically include an upfront sales charges and must be held by investors for long periods to account for the front-end load. Mutual fund “switching” occurs when a customer sells mutual fund shares and reinvests the proceeds in another mutual fund, often incurring additional charges and commissions.
FINRA also sanctioned Triad for failing to have a system in place to monitor patterns of variable annuity exchanges and to determine whether its registered representatives engaged in high rates of VA exchanges.
Lastly, Triad is accused of failing to timely report disclosures relating to customer-related arbitrations and customer complaints. For example, in connection with 15 customer arbitrations that resulted in settlements greater than $25,000. Triad’s disclosures were, on average, more than 600 days late, FINRA said.
In another instance, Triad failed to timely report four written customer complaints, which were all related to one representative that revealed a pattern of borrowing from customers away from the firm. Triad’s disclosures were an average of 232 days late. FINRA noted that Triad settled all four complaints.
Triad consented to the fine and restitution without admitting or denying FINRA’s findings.
