Firm Agrees to a Refund and Fine for Unreasonable Supervisory System

Apr 1

Independent Financial Group, LLC, as part of a Consent Order that Texas Securities Commissioner, Travis J. Iles entered on April 1, 2021, agreed to refund $276,398.42 to the customers of a former Texas-based representative who implemented a high-risk trading strategy in leveraged exchange-traded funds (“leveraged ETFs”) throughout client accounts. Specifically, the Representative implemented a buy-and-hold strategy using UVXY, a leveraged inverse ETF designed for short-term use and incurred significant losses as a result.

In addition to paying back customers for the losses they incurred, Independent Financial Group agreed to pay an administrative fine of $75,000 for its failure to have a reasonable supervisory system in place to monitor the activities of the Representative. Specifically, the firm failed to have a specific training requirement regarding leveraged ETFs, failed to have a supervisory system in place to monitor and flag for extended holding periods related to leveraged ETFs and failed to prevent the Representative from purchasing more than 2x leveraged ETFs in client accounts at a time when the Representative was not approved to purchase them.

Securities Commissioner Iles previously entered a consent order on December 1, 2020 wherein Commissioner Iles denied the registration of the former representative responsible for the high-risk trading strategy in leveraged ETFs.