Walter Bish’s Unsuitable ETN Recommendations Cost Smith Brown & Groover

As Warren Buffett famously said, “Risk comes from not knowing what you’re doing” – a statement that resonates powerfully in the recent case involving Walter Bish, a broker from Smith Brown & Groover who found himself on the wrong side of financial regulations by recommending products he didn’t fully understand.

The financial advisory world operates on a foundation of trust and expertise. When that foundation cracks, investors often find themselves facing significant losses. In fact, studies show that bad financial advice costs American investors approximately $17 billion annually in retirement savings alone.

The Case Against Walter Bish: Complex Products and Inadequate Due Diligence

Financial Industry Regulatory Authority (FINRA) recently took disciplinary action against Walter Bish (CRD# 3214712) for recommending high-risk exchange-traded notes (ETNs) without proper understanding of the products themselves.

According to FINRA’s Letter of Acceptance, Waiver, and Consent, Bish recommended a trading strategy involving complex ETNs to seven clients between July 2014 and February 2018. The critical issue? He failed to conduct adequate due diligence on either the strategy or the ETNs themselves.

Most concerning was Bish’s apparent unawareness that:

• The ETN could be accelerated or terminated under certain circumstances
• The product was explicitly designed for daily trading risk management
• The ETN’s own prospectus warned it “may not be suitable for investors who planned to hold it for longer than one day”
• Investors could potentially “lose all of their investment during a spike in volatility”

This lack of understanding didn’t just violate technical rules – it placed real investors at considerable risk. For violating FINRA Rules 2111 and 2010, Bish received a $5,000 fine and a three-month suspension from all capacities within any FINRA member firm. His suspension began December 2, 2024, and will continue until March 1, 2025.

The Broker Behind the Violations

Walter Bish is not a novice in the financial world. With 25 years of experience, having started his brokerage career in 1999 with Smith Brown & Groover in Macon, Georgia, Bish has completed three industry exams, including the Series 7 and Series 63. This extensive experience makes the lack of due diligence particularly troubling.

His BrokerCheck report reveals more than just the recent FINRA action. In 2019, an investor filed a complaint alleging Bish breached his fiduciary duty, recommended unsuitable investments, made misrepresentations and omissions, and engaged in negligence regarding variable annuities and volatility-linked ETNs. This complaint resulted in a significant $425,000 settlement paid by his firm in December 2022.

The pattern emerging from these incidents suggests potential systemic issues with how Bish evaluated and recommended complex financial products to his clients. Investment fraud and bad advice from financial advisors are unfortunately all too common, costing investors billions each year.

What is FINRA Rule 2111 and Why Does it Matter?

When we strip away the regulatory jargon, FINRA Rule 2111 essentially establishes the “suitability obligation” – the requirement that financial advisors must have a reasonable basis for believing their recommendations are suitable for their clients based on the client’s investment profile.

In practical terms, this means brokers must:

• Understand the products they recommend
• Make sure those products align with their client’s investment objectives, risk tolerance, financial situation, tax status, and other individual circumstances
• Not recommend strategies or products they don’t fully comprehend

When advisors recommend complex products like ETNs without understanding fundamental aspects of how they work, they violate this core principle. ETNs, which are unsecured debt securities issued by financial institutions, can be particularly risky because they combine market risk with the credit risk of the issuer – meaning if the issuing bank fails, investors could lose everything regardless of how the underlying index performs.

Rule 2010, the other regulation Bish violated, requires brokers to observe high standards of commercial honor and just and equitable principles of trade.

Lessons for Investors: Protecting Yourself from Unsuitable Recommendations

The Bish case offers valuable lessons for investors working with financial advisors:

• Ask questions about recommended products – If your advisor can’t clearly explain how a product works, including its risks, consider it a red flag
• Review prospectuses and offering documents – These often contain important risk warnings that your advisor should discuss with you
• Verify your advisor’s background through FINRA’s BrokerCheck to see any past disciplinary actions
• Seek second opinions on complex investment strategies, especially those involving leveraged or volatility products
• Understand the holding period for any recommended investment – products designed for short-term trading are rarely appropriate for long-term investors

When financial professionals fail to properly understand the products they recommend, the consequences can be devastating for investors. The regulatory actions against Bish serve as an important reminder that expertise matters, especially when navigating the increasingly complex world of financial products.

For those who believe they may have been affected by unsuitable investment recommendations, seeking qualified legal counsel may help recover losses and prevent others from experiencing similar situations. Haselkorn and Thibaut, a national investment fraud law firm, can be reached at 1-888-784-3315. The financial world can be complex, but one principle remains simple: those entrusted with managing others’ money must understand what they’re doing with it.