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FINRA Fines Minneapolis based Broker Feltl & Company for Inadequate Supervision Relating to Sales of Penny Stocks

The Financial Industry Regulatory Authority (FINRA) alleged that Feltl & Company, a firm based in Minneapolis, did not properly oversee its penny stock business between January 2008 and February 2012. While Feltl did not admit to any wrongdoing, the firm will pay $1 million to settle its claims. FINRA explained that Feltl did not meet risk-disclosure standards and record keeping requirements. In other words, Feltl failed to tell customers about the suitability and risks associated with certain penny stocks and did not send customers account statements that reflected the market value of the same.

FINRA also alleged that the firm did not keep the correct records for transactions for securities that temporarily did not meet the definition of a penny stock. Furthermore, Feltl & Company did not keep track of penny-stock transactions in securities that did not make a market.

According to the Wall Street Journal, Feltl made a market in 17 penny stocks and earned approx. $2.1 million from around 2,450 solicited customer transactions during the four years in question. FINRA was unclear as to how much money the firm made from the transactions they had no record of but that stated that revenue from all transaction in that vein are substantial.

What are Penny Stocks?

Penny stocks are securities that trade below $5 a share and are traditionally issued by small companies with limited revenue. They have very high risk because there is usually a lack of information about the companies’ business potential and current, as well as future, value. Because of this, FINRA has repeatedly stated that firms should review their procedures concerning penny stock sales and transactions.

Feltl & Company has approximately 110 brokers and eight branches throughout Minnesota and Illinois.

If you have suffered significant losses as a result of your investment with Feltl & Company or another firm, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a securities fraud attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or for a no-cost, confidential consultation.

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