Publicly available records provided by the Financial Industry Regulatory Authority (FINRA) indicate that broker-dealer, Carlton & Associates, Inc. (CRD # 20999) was recently sanctioned by FINRA’s Department of Enforcement after an investigation into its failure to adequately supervise sales of volatility-linked exchange traded products (ETPs).
The Law Office of Kevin J. Deloatch, Esq. is interested in speaking to investors who have complaints regarding Carlton & Associates, Inc. and volatility-linked ETPs.
Registration Background for Carlton & Associates, Inc.
Carlton & Associates, Inc. has been a member of FINRA (formerly the NASD) since 1987 with its main office located in Tampa, FL. It is a full-service brokerage firm with approximately 160 branch offices and approximately 390 registered representatives.
FINRA’s Allegations Against Carlton & Associates, Inc.
According to FINRA Letter of Acceptance, Waiver and Consent (AWC) dated May 17, 2021, Carlton & Associates, Inc. consented to, without either admitting to or denying, the following findings by FINRA’s Department of Enforcement:
- “During the period of February 2014 to February 2020, [Carlton & Associates, Inc.] failed to establish and maintain a supervisory system reasonably designed to achieve compliance with the firm’s suitability obligations in connection with sales of non-traditional and volatility-linked exchange traded products (ETPs)”;
- “Although the firm was aware of the complex nature of the products, [Carlton & Associates, Inc.] permitted its representatives to offer the products to retail customers without a reasonable supervisory system to properly understand the products’ features and risks and review and monitor transactions”;
- “[Carlton & Associates, Inc.] representatives recommended non-traditional and volatility-linked ETPs to retail customers without understanding the products were intended for short-term trading rather than as buy-and-hold investments, and the firm’s customers held the products for longer periods of time, resulting in losses”;
- “In addition, during the period from January 1, 2014 to June 21, 2018, [Carlton & Associates, Inc.] failed to offer retail customers educational materials prior to their first purchases of collateralized mortgage obligations (CMOs), in violation of FINRA Rules 2216(b)(2) and 2010, and it failed to establish, maintain, and enforce a supervisory system, including written supervisory procedures (WSPs), reasonably designed to achieve compliance with FINRA Rule 2216(b)(2)”;
- “Further, [Carlton & Associates, Inc.] unreasonably assigned an individual to supervise a registered representative despite the presence of a conflict of interest, in violation of FINRA Rules 3110(b)(6) and 2010, and it allowed a non-registered person to accept and enter securities orders”; and
- By virtue of his it’s actions, Carlton & Associates, Inc. violated NASD Rule 3010 and FINRA Rule 3110, regarding supervision; FINRA Rule 2010, regarding standards of commercial honor and principles of trade; FINRA Rule 2111, regarding suitability; FINRA Rule 2216(b)(2) regarding communications with the public about CMOs; and NASD Rule 1031 and FINRA Rule 1210, regarding registration requirements.
FINRA’s Sanctions
FINRA’s May 17, 2021 AWC also indicates that as a result of Carlton & Associates, Inc.’s failure to supervise the sales of volatility-linked ETPs, it consented to the following sanction(s):
- A censure;
- A fine in the amount of $250,000.00;
- Restitution in the amount of $472,007.20; and
- An undertaking to retain and independent consultant to review the firm’s policies.
Carlton & Associates, Inc. Has A History of Regulatory Actions
In addition to Carlton & Associates, Inc. being censured and fined for its failure to adequately supervise volatility-linked ETPs, as described in the May 17, 2021 AWC, FINRA BrokerCheck for Carlton & Associates, Inc. reveals it has a prior history of regulatory actions, including but not necessarily limited to the following:
- On December 18, 2020 Carlton & Associates, Inc. entered into an AWC with FINRA regarding its alleged failure to properly report trade information. The firm was censured, fined $18,000.00 and required to update its written supervisory procedures.
- On March 11, 2019 Carlton & Associates, Inc. was sanctioned by the SEC for its alleged breach of fiduciary duty and inadequate disclosures regarding its mutual fund share class selection practices. The firm was censured, subjected to a cease and desist from committing or causing violations of sections 206(2) and 207 of the Advisers Act and required to pay disgorgement of $278,157.85.
- On September 14, 2016 Carlton & Associates, Inc. entered into an AWC with FINRA regarding its alleged failure to report transactions in TRACE eligible securities in a timely manner. The firm was fined $5,000.00.
Carlton & Associates, Inc. Has A History of Customer Complaints
FINRA BrokerCheck for Carlton & Associates, Inc. also reveals it has a history of customer complaints and/or customer-initiated arbitrations, including but not necessarily limited to the following:
- On October 22, 2002, a customer-initiated arbitration was filed naming Carlton & Associates, Inc. as a respondent. The customer alleged breach of fiduciary duty, suitability and breach of contract. The customer further alleged damages in the amount of $400,000.00. On October 16, 2003, the arbitration panel issued an award in favor of the customer in the amount of $61,500.01.
- On May 12, 2004, a customer-initiated arbitration was filed naming Carlton & Associates, Inc. as a respondent. The customer alleged breach of fiduciary duty, churning, suitability and unauthorized trading. The customer further alleged damages in the amount of $185,449.00. On February 23, 2005, the arbitration panel issued an award in favor of the customer in the amount of $76,000.00.
- On May 6, 2009, a customer-initiated arbitration was filed naming Carlton & Associates, Inc. as a respondent. The customer alleged breach of fiduciary duty, churning, misrepresentation and omission of facts. The customer further alleged damages in the amount of $337,859.83. On January 26, 2010, the arbitration panel issued an award in favor of the customer in the amount of $607,775.33.
If you or someone you know has or had a brokerage account with Carlton & Associates, Inc. and have concerns regarding losses in your investments, including ETPs or possible sales practice violations including fraud, you may be entitled to recover lost funds. The Law Office of Kevin J. Deloatch, Esq. has an extensive securities law practice and over 30 years of experience on Wall Street. Call today at (646) 792-2156 for a free consultation. The time to file your claim may be limited so you should call today to avoid delay.
