Home Alts News Massachusetts Charges Purshe Kaplan with Failing to Supervise Dually-Registered Agents

Massachusetts Charges Purshe Kaplan with Failing to Supervise Dually-Registered Agents

The Massachusetts Securities Division has charged broker-dealer Purshe Kaplan Sterling Investments with failing to supervise dually-registered agents.

The Massachusetts Securities Division has charged broker-dealer Purshe Kaplan Sterling Investments with failing to supervise dually-registered agents who purportedly sold unsuitable investments to Massachusetts investors while operating as independent investment advisers of Harvest Group Wealth Management.

The complaint alleges that more than $2.3 million in losses were incurred as a result of unsuitable investments in leveraged exchange-traded funds. The regulator said that Purshe Kaplan had a duty to review the transactions as part of their supervisory responsibilities, even though they were conducted outside of the firm.

“Despite warnings from FINRA that leveraged exchange-traded funds are typically unsuitable for average investors who plan to hold them for more than a day, the Harvest Group invested more than 340 client accounts in leveraged exchange-traded funds for days, weeks, months, and even a year,” the regulator said.

According to the complaint, for years, Purshe Kaplan reportedly failed to review any of the private securities transactions of its dually-registered agents at the Harvest Group. After the broker-dealer amended its policies in 2019 to conduct risk-based reviews of dually-registered advisers’ outside transactions, it still failed to conduct any reviews that year, and conducted only one transaction review in 2020, the regulator said.

The Massachusetts Securities Division is seeking to require Purshe Kaplan to provide full restitution to investors who suffered losses from the failure to supervise, as well as a censure and administrative fine.

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