SEC Sanctioned Registered Broker and FA Sanford M. Katz with a Cease-and-Desist Order

Sanford M. Katz (CRD#: 1558898) is a registered broker and investment advisor at Wells Fargo Clearing Services, LLC.

Broker’s Background

He entered the securities industry in 1986 and previously worked with Goldman, Sachs & Co.; UBS Financial Services, Inc.; and Credit Suisse Securities (USA) LLC.

Allegations of Misconduct

According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), in April 2017, the Securities and Exchange Commission (Commission) deemed it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 15(b) of the Securities Exchange Act of 1934 (Exchange Act) and Sections 203(f) and 203(k) of the Investment Advisers Act of 1940 (Advisers Act) against Sanford Michael Katz (Katz).These proceedings arise out of breaches of fiduciary duty by Katz in connection with his purchases and recommendations of mutual fund shares for advisory clients.

Between January 1, 2009 and January 21, 2014 (the Relevant Period), Katz, then an investment adviser representative at his member firm purchased or held Class A mutual fund shares for advisory clients who were eligible to purchase or hold less expensive institutional share classes of the same mutual funds. A significant difference between Class A shares and institutional share classes is the existence of marketing and distribution fees imposed on Class A shareholders pursuant to Section 12(b) of the Investment Company Act and Rule 12b-1 thereunder (12b-1 fees), typically 25 basis points per year for Class A shares. The 12b-1 fees are paid out of the assets of the fund as a portion of its expense ratio. In this case, the 12b-1 fees were passed through to the firm, which in turn paid a portion of that amount to its investment adviser representatives, also referred to as Relationship Managers (RMs), including Katz. Thus, 12b-1 fees decreased the value of advisory clients’ investments in mutual funds and increased the compensation paid to the firm and its RMs.

During the Relevant Period, Katz’s practice of putting advisory clients in Class A shares when those clients were eligible for less expensive institutional share classes resulted in the firm collecting approximately $2.5 million in 12b-1 fees, approximately $1.1 million of which was paid to Katz. This practice was inconsistent with Katz’s fiduciary duty, his representations to clients, and his obligation to obtain best execution for his advisory clients. Katz willfully violated Section 206(2) as a result of the negligent conduct described above.

As a result, Sanford Katz was sanctioned with a cease and desist, censure, civil and administrative penalties/fines in the amount of $850,000.00, disgorgement in the amount of $1,124,858.89, and monetary penalty other than fines in the amount of $197,587.38.

For a copy of the SEC press release, click here.

For a copy of Sanford Katz’s FINRA BrokerCheck, click here.


We Help Investors Recover Investment Losses

Excessive trading often occurs when a Financial Advisor puts his or her interests ahead of the clients and makes transactions solely for the purpose of generating commissions. Financial Advisors have a regulatory duty to recommend suitable investment strategies. One of the components of the suitability analysis is quantitative suitability.

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. 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.

The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis.  Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at (800) 931-8452 or by email at mwolper@wolperlawfirm.com.


Attorney Matthew Wolper

Attorney Matthew WolperMatt Wolper is a trial lawyer who focuses exclusively on securities litigation and arbitration. Mr. Wolper has handled hundreds of securities matters nationwide before the Financial Industry Regulatory Authority (FINRA), American Arbitration Association (“AAA”), JAMS, and in state and federal court. Mr. Wolper has handled and tried cases involving complex financial products and strategies ranging from traditional stocks and bonds to options, margin and other securities-based lending products, closed/open-end mutual funds, structured products, hedge funds, and penny stocks. [Attorney Bio]