No Procedures, No Trading: Commissioner Suspends Investment Adviser & Its Representative for not having Procedures to Prevent Trading Inequities

Oct 1

John Stuart, the sole owner and investment adviser representative of Ironwood Wealth Management, LLC agreed to a three-month suspension of his and his firm’s license with the Securities Commissioner. The suspension is part of a disciplinary order that Texas Securities Commissioner, Travis J. Iles entered on October 1, 2020.

In connection with their investment advisory services, Stuart and Ironwood traded options in certain client accounts using a block trading service from an online, discount broker. Block trading is a feature that allows an adviser to enter trades in an omnibus brokerage account and then allocate trades across multiple, separate accounts after the orders have been executed.

From November 2018 through February 2019, Stuart participated in options trading alongside his clients. Ironwood did not have procedures to supervise Stuart participating in trades alongside client and therefore no way to ensure that certain accounts did not receive preferential treatment over other accounts. In fact, Ironwood had no procedures at all. As a result, multiple clients lost a total of $5,392.30, while Respondent Stuart's account profited $10,050.05 from the options trading.

In addition to a three-month suspension of their licenses, Stuart and Ironwood are ordered to comply with the terms of an undertaking in which they agree to pay $15,442.35 back to clients that participated in options trading during the relevant period; to not solicit any new clients for a period of six months; and to retain an independent outside consultant to complete a review of their business activities within six months.