Securities Industry Commentator by Bill Singer Esq

The causes of action relate to Respondents' knowledge of and involvement with LFG's former Chief Compliance Officer and her alleged violation of duties to Claimants and her resignation from LFG to start her own business and directly compete with Claimants. 

Between November 2016 and December 2017, Paek completed and submitted six fictitious VA applications to the Firm in order to meet her minimum production requirements at Pruco. The six VA applications were made in the names of three former customers at her prior employing firm, two of her Pruco insurance customers, and a prospective customer at Pruco. Paek forged the individuals' electronic signatures on all of the applications. None of the individuals were aware of or authorized the applications and the annuities were never funded. For five of the six VA applications, Paek created fictitious third-party brokerage statements, which she submitted to the Firm to give the false impression the VAs would be funded from third-party accounts. The Firm discovered Paek's falsifications and forgeries during a review of unfunded VA applications. Paek received approximately $23,000 in advance commissions for the fictitious VA applications, all of which was recovered by the Firm.

In June 2018, Cetera requested Zhang resubmit a customer form related to an alternative investment that was missing some necessary information. Zhang added the missing information to the form, but instead of having the form re-executed by the customer, Zhang changed the date of the original signature page. When questioned by her supervisor about the signature, Zhang initially denied re-using the signature page, but upon further questioning admitted that she had done so for the convenience of the customer, who was on a business trip. 

As a result of this admission, Cetera reviewed additional documents submitted by Zhang and discovered two other instances in which Zhang reused customer signature pages. In March 2017 and March 2018, two separate customers completed an illiquid investment acknowledgement form and an account application by hand and signed them. Their signatures attested to the fact that the customers had reviewed the forms for accuracy. Zhang then transferred the information from the handwritten forms into new, typewritten versions that could be printed from her computer. When she did this, she added information that the customers had failed to provide. Zhang did not show the new forms to the customers, nor did she have them sign the new forms. Instead, she attached the signature pages from the handwritten forms to the new forms, and submitted them to the firm. On one of the new forms, Zhang inadvertently entered incorrect information

In two discretionary accounts for clients, Bowers was buying and selling shares of the Proshares Ultra VIX Short-Term Futures ETF, a leveraged fund.

Leveraged ETFs use financial derivatives and debt to magnify the returns of an underlying index.

The UVXY fund seeks to profit by capitalizing on volatility in the S&P 500 Index, which tracks the performance of 500 widely held large U.S. companies across the major sectors of the economy. The UVXY benefits when the S&P 500 index declines.

Although the prospectus for the UVXY states it is "intended for short-term use" and it requires almost daily monitoring, Bowers held the fund in one client's account for 987 days and sold the shares for a 93% loss. 

In a second client's account, Bowers held the UXVY for 356 days and lost 98% of the account's value. 

The firm failed to enforce its written supervisory procedures because neither William Lowell nor other supervisory personnel reviewed the monthly statements for discretionary accounts like the two accounts Bowers managed. 

If the firm had reviewed the accounts monthly, it could have determined the UXVY was being held for longer than recommended and was causing losses in the two accounts

• Securities Industry Commentator
• Bill Singer