FINRA has fined and censured NEXT Financial Group, Inc. (“NEXT”) over supervisory failures related to unsuitable short-term trading of mutual funds and municipal bonds, and over-concentration of customer accounts in Puerto Rican municipal bonds.
NEXT was fined $750,000 and consented to provide a certification to FINRA, within 120 days, regarding the implementation of reasonably designed procedures to address its supervisory failures.
Iorio Altamirano LLP represents investors nationwide that have disputes with their financial advisors or brokerage firms, such as NEXT Financial Group, Inc.
If you have lost money with NEXT Financial Group, Inc., contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account.
FINRA Letter of Acceptance, Waiver, and Consent No. 2019063058701
NEXT Financial Group, Inc. and FINRA entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) on July 13, 2021.
The AWC indicated that from January 2012 through February 2019, NEXT failed to establish, maintain, and enforce a supervisory system, including written supervisory procedures (WSPs), reasonably designed to detect and prevent unsuitable short-term trading of mutual funds and municipal bonds in customer accounts and over-concentration of customer accounts in Puerto Rican municipal bonds.
Specifically, the firm failed to detect and reasonably respond to red flags in the trading of a firm broker prior to customers incurring significant losses. These red flags included short-term trading of mutual funds and municipal bonds, as well as over-concentration of Puerto Rican municipal bonds in customer accounts.
From 2012 until February 2019, a firm broker employed a strategy of short-term trading of Class A Shares in 19 customer accounts, many of which belonged to seniors. This trading strategy resulted in the 19 accounts incurring unnecessary Class A Share sales charges totaling approximately $925,000.
From approximately June 2013 to November 2016, the firm broker engaged in short-term trading of Puerto Rico bonds in 16 customer accounts and concentrated five customer accounts in Puerto Rico bonds. These bonds carried risks not associated with other municipal bonds because of concerns about the Puerto Rican economy and subsequent restructuring of Puerto Rican debt. The risk of such concentration was compounded by frequent trading in the Puerto Rico bonds because of the repeated payment of upfront costs that would decrease any investment returns. The broker’s customers suffered losses of approximately $4.1 million on investments in Puerto Rico bonds.
As a result of the misconduct, NEXT violated NASD Rules 3010(a) and (b), FINRA Rules 3110(a) and (b), MSRB Rules G-27(b) and (c), and FINRA Rule 2010. The firm was fined $750,000, $225,000 of which pertains to the violations of MSRB Rule G-27. The firm also consented to provide a certification to FINRA, within 120 days of the AWC, regarding the implementation of reasonably designed procedures to address unsuitable short-term trading of mutual funds and municipal bonds in customer accounts and over-concentration of customer accounts in Puerto Rican municipal bonds.
You can read more about our firm’s experience representing investors in Puerto Rico securities here.
NEXT Financial Group, Inc. (CRD#: 46214)
NEXT is headquartered in Houston, Texas, and has been a FINRA member since 1999. The firm is a general securities broker-dealer and currently has approximately 540 registered persons.
On December 5, 2017, FINRA issued a Letter of Acceptance, Waiver and Consent (No. 2015043319901), in which NEXT was censured, fined $750,000, and was required to retain an independent consultant for, among other things, systemic supervisory failures relating to excessive trading and variable annuities.
How to Recover Losses or Obtain a Free Consultation
If you have lost money with NEXT Financial Group, Inc., contact New York securities arbitration lawyer Jorge Altamirano of Iorio Altamirano LLP at email@example.com or toll-free at (855) 430-4010 for a free and confidential evaluation of your account.
Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. We pursue FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.