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FINRA Sanctions Broker Michael Zukowski for Recommending Unsuitable ETF Transactions

The Financial Industry Regulatory Authority (FINRA) sanctioned broker Michael Zukowski for recommending unsuitable investments in inverse and inverse-leveraged Exchange Traded Funds to his clients.

On December 23, 2010 RBC Capital Markets, LLC filed a Termination Notice (U5) stating that Zukowski had failed to meet firm expectations. Later, on August l8, 2011, RBC filed a an amended disclosure to include an Administrative Complaint filed by the Massachusetts Securities Division (MSD) which stated that: “The Massachusetts Securities Division alleged Michael Zukowski made unsuitable recommendations to brokerage and advisory clients regarding the purchase and sale of leveraged, inverse and inverse-leveraged exchange traded funds.” As a consequence, during November 2012 Zukowski entered into a Consent Order with the MSD concerning the allegations of unsuitable recommendations. Zukowski agreed to sanctions including a Cease and Desist as well as a five-year bar to act as a “broker-dealer agent, investment adviser, investment adviser representative and issuer-agent” in Massachusetts. Finally, on November 16, 2012, RBC filed another amended Form U5 and disclosed a written complaint by two clients indicating that the “Clients allege material omissions and unsuitable advice regarding non-traditional ETFs, in period from February to December 2009.”

FINRA found that during October 2007 until September 2009, Zukowski recommended approximately 975 purchase and sell transactions involving Non-Traditional ETFs to about 30 customers without any due diligence. In general, FINRA has explained before that Non-Traditional ETFs are highly speculative products containing substantial and unusual risks including the risks associated with the daily reset and leverage components. Given Zukowski’s lack of due diligence, FINRA found that his recommended transactions lacked a reasonable basis and were therefore unsuitable.

Moreover, FINRA found that a portion of the transactions were unsuitable on a customer-specific basis. For example, FINRA found that 488 of these transactions were recommended to approx. 30 customers who had conservative growth and long-term growth as their investment objectives. And, while the prospectuses for these investments highlighted the risk involved with holding the funds for more than one day, 271 of Zukowski’s Non-Traditional ETF recommendations were purchases that were held in the accounts of 28 customers for longer than seven business days and had an average holding period of 27 days. FINRA stated that total losses for these clients totaled approximately $1,094,490.

If you have suffered significant losses as a result of your investment with Michael Zukowski 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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