On March 11, 2019, the Financial Industry Regulatory Authority (FINRA) formally addressed allegations against CreativeOne Securities. As Benjamin Franklin once said, “An investment in knowledge pays the best interest”. However, the entity came under fire due to inadequate disclosures concerning its mutual fund share class selection practices.
Allegation’s Seriousness, Case Information
How Allegations Affect Investors
As an informed investor, you should know such allegations are not to be taken lightly. As per the United States Securities and Exchange Commission (SEC), it is the fiduciary duty of all financial advisors to recommend investments that are suitable for their clients. This means advisors need both an understanding of the investor’s profile, including their financial situation, risk tolerance, and investment objectives, and a comprehensive knowledge of the investment products they recommend. It is alleged that CreativeOne Securities violated this principle by recommending certain mutual fund shares that charged higher fees. The alleged unethical practice not only contradicts the firm’s duty to its clients, but also paints an alarming picture for investors under its advisement.
The Financial Advisor’s Background and Past Complaints
CreativeOne Securities: A Profile
In the competitive world of brokerage, CreativeOne Securities has operated under a series of 71 names – including notable business entities such as Voyage Financial Partners, Affinity Asset Management and Western Lakes Financial. Headquartered in Overland Park, Kansas, it serves a vast clientele through an array of investment products including mutual funds, stocks, and bonds.
Despite its diverse portfolio, CreativeOne Securities registered a significant ding to its reputation when it failed to provide cost-effective options to its clients. This unfortunate aspect of their history exacerbates investor concerns, posing questions on the firm’s credibility and commitment to client interests.
Coming to Grips with the FINRA Rule
For stakeholders new to finance or without an in-depth understanding of legal jargon, FIRNA regulations can indeed appear as cluttered gobbledegook. Put simply, the SEC obliges entities – like CreativeOne Securities – who make investment recommendations, to provide options that best suit the client’s profile. This, essentially, is where CreativeOne Securities purportedly faltered.
Ensuring that the fees connected with an investment are revealed transparently can be considered the heart of this regulation. Not only is this ethically correct, but it also rules out the possibility of clients suffering from unforeseen financial consequences.
Consequences and Lessons Learned
Repercussions and Takeaways
Following the allegations, CreativeOne Securities was ordered to pay a hefty disgorgement of $31,003 and a prejudgment interest of $4,372 to the SEC. Despite this, financial statistics reveal that nearly 60-70% of financial advisors who have been reported for misconduct keep their jobs. Understanding the lessons from such cases can be a lifesaver for most retail investors.
As the whole fiasco involving CreativeOne Securities lays plain, it is crucial for investors to maintain an active and informed role in managing their investments. Even more so, it is important to clarify all aspects of any financial decision, especially the nature of fees and hidden costs attached to investment products.
Stay Informed, Stay Safe
Remember, as an investor, you have the power to safeguard your assets by staying informed. Be sure to always thoroughly read all pertinent documents and ask questions if you don’t understand something. This will ensure you’re not caught off guard and that your investments remain secure.
