Cadaret Grant Stockbroker Admits To Unauthorized Trading
Eugene James Long (also known as EJ Long) a stockbroker currently employed by Cadaret Grant Co. has been fined $5,000.00 and suspended from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity supported by findings that he executed unauthorized trades in customer accounts. Letter of Acceptance Waiver and Consent No. 2019061646402 (July 2, 2020).
According to the AWC, an examination of Cadaret Grant’s branch office had been undertaken by FINRA personnel to address the securities broker dealer’s activities between August of 2017 and August of 2018. FINRA discovered in this examination that throughout that period, at least eighty trades had been made by Long on a discretionary basis in Cadaret Grant customer accounts. The transactions affected sixty-four customer accounts.
FINRA stated that customers had not provided any written authorization allowing Long to effect trades without having to get pre-trade confirmation from them. The AWC revealed that Long’s actions were also not approved by Cadaret Grant since it did not approve the customers’ accounts for purposes of Long’s discretionary trading. FINRA found Long’s exercise of discretion to be violative of FINRA Rules 2010 and National Association of Securities Dealers (NASD) Rule 2510(b).
This is not the first time that Long has been sanctioned by a securities regulator. On September 11, 2018, Cadaret Grant and Long were ordered by Securities and Exchange Commission (SEC) to cease and desist violating federal securities laws based upon findings that Long effected unsuitable trades of VelocityShares 3X Long Crude Oil Exchange Traded Notes (UWTI ETNs) in customer accounts. In the Matter of Cadaret Grant et al. Administrative Proceeding File No. 3-18738 (Sept. 11, 2018).
According to the Order, Long was under the impression in 2015 that oil prices would fall and then rebound which prompted him to recommend UWTI ETNs to be held by customers between 2015 and 2016. SEC noted that UWTI was a complex triple leveraged product that was exposed to an index made up of crude oil futures contracts.
The prospectus for UWTI indicated that the ETN was not meant to be held for more than a day and that there was no direct exposure to a crude oil spot price. Long was ignorant of this information. He supposedly failed to consider the daily trading risks stated in the UWTI prospectus before making recommendations.
Investors were also not told about UWTI during the period in which they were discussing their investments with Long. The Order revealed that investors did not know about the risks of making these investments and they were not provided any explanation from Long as to why the non-traditional ETNs were held for longer periods.
The Order noted that Long advised investors to hold UWTI for a longer period than other stockbrokers recommended. In fact, 30 investors had been advised by Long to place approximately $400,000.00 in UWTI. The stockbroker intended on UWTI to be held until there was a recovery of oil prices in 2015. Customers were inappropriately advised to hold the investments as they lost value. Those who acted on Long’s advice collectively experienced about a $350,000.00 drop in value amounting to 90 percent losses in their accounts. SEC deemed Long’s advice unsuitable and his actions negligent. His conduct was violative of Securities Act Section 17(a)(2) and 17(a)(3).
FINRA Public Disclosure additionally confirms that Long has been identified in a customer initiated investment related written complaint where the customer sought $20,963.16 in damages founded on accusations that the Cadaret Grant customer was placed in inappropriate mutual funds which poorly performed.
Long has been employed by Cadaret Grant since January 2, 1998.