Cadaret Grant & Co. Broker, Eugene Long, Suspended By FINRA For 15 Days, For Allegedly Exercising Discretion In Client Accounts Without Authority
Eugene Long (CRD #2386287) is a Financial Advisor at Cadaret, Grant & Co. in Blue Bell, PA. Eugene Long has been in the securities industry since 1993 and previously worked at Independent Financial Services.
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), on July 2, 2020, Eugene Long was sanctioned by FINRA, suspending him for fifteen days and fining him $5,000, for allegedly exercising discretion in customer accounts without authorization. According to the FINRA sanction:
“During the period between August 2017 and August 2018, Long exercised discretion without written authorization in 64 customer accounts, in violation of NASD Rule 2510(b) and FINRA Rule 2010.”
For a copy of the FINRA sanction, click https://www.finra.org/sites/default/files/fda_documents/2019061646402%20Eugene%20J.%20Long%20CRD%202386267%20AWC%20va.pdf
In addition to the foregoing, Eugene Long has been the subject of an SEC investigation, which was initiated in 2018. The SEC issued a cease and decist order against Cadaret, Grant & Co. and Eugene Long in connection with their sales practices of leveraged ETFs.
According to the SEC cease and decist order, “beginning in January 2015, Eugene Long and certain other Cadaret Grant registered representatives believed oil prices had fallen and would recover over several months. These representatives recommended that customers buy and hold a security called VelocityShares 3X Long Crude Oil ETN (“UWTI”), which is a complex exchange-traded note (“ETN”) that offers exposure to an index comprised of crude oil futures contracts and provides triple leverage. They believed UWTI would increase in value with an increase in crude oil prices, even if held for several months. However, UWTI’s prospectus clearly stated that it offered no direct exposure to the spot price of crude oil and that it was not designed for holding periods longer than one day, but rather that it was suitable for sophisticated investors with very short investment horizons. The representatives either did not read, or read and dismissed, these warnings without a reasonable investigation and lacked a reasonable basis for their recommendations in violation of Sections 17(a)(2) and 17(a)(3) of the Securities Act. Cadaret Grant’s retail investors lost, on average, more than 90 percent of the amounts they invested in UWTI pursuant to the representatives’ recommendations.”
The SEC investigation culminated in a $250,000 sanction.
For a copy of Eugene Long’s CRD, click https://brokercheck.finra.org/individual/summary/2386267#disclosuresSection.
Unauthorized trading is strictly prohibited by FINRA rules. Before a transaction can be entered in a customer account, the Financial Advisor must first obtain verbal or written authorization from the client. In the absence of authorization, the transaction is subject to rescission by the customer.
Financial advisors have a legal and regulatory obligation to recommend only suitable investments that are appropriate for their clients’ needs and objectives. Their employing brokerage firm has a legal and regulatory obligation to supervise the Financial Advisors’ sales practices and dealings with clients. To the extent any of these duties are breached, the customer may be entitled to a recovery of his or her investment losses.
Reasonable basis suitability requires that a recommended investment or investment strategy be suitable or appropriate for at least some investors. Reasonable basis suitability requires an advisor to conduct adequate due diligence so that he or she can determine the risks and rewards of the investment or investment strategy.
Quantitative suitability requires a brokerage firm or financial advisor with actual or de facto control over a customer’s account to have a reasonable basis for believing that a series of recommended transactions – even if suitable when viewed in isolation – is not excessive and unsuitable for the customer when taken together in light of the customer’s investment profile. No single test defines excessive activity, but factors such as the turnover rate, the cost-equity ratio, and the use of in-and-out trading in a customer’s account may provide a basis for a finding that a member or associated person has violated the quantitative suitability obligation.
Customer-specific suitability requires that a member or associated person have a reasonable basis to believe that the recommendation is suitable for a particular customer based on that customer’s investment profile. Among the criteria that a financial advisor must evaluate to satisfy his or her customer-specific suitability obligations include the investor’s:
• Other investments
• Financial situation and needs
• Tax status
• Investment objectives
• Time horizon
• Liquidity needs
• Risk tolerance
• Any other information disclosed by the customer
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