Van Clemens Stockbroker Sanctioned For Unauthorized Trading
Peter Douglas Monson (also known as Pete Monson) of Minneapolis Minnesota a stockbroker currently registered with Van Clemens Co. Incorporated has been fined $7,500.00 and suspended for six months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon findings that the stockbroker effected unauthorized and inappropriate transactions in Van Clemens customer accounts. Letter of Acceptance Waiver and Consent No. 2017053162102 (Feb. 4, 2020).
According to the AWC, Monson serviced the account of a forty-four year old customer, GC, who relocated her individual retirement account to Van Clemens when Monson became registered there. At the time, GC maintained no experience outside of investing in mutual fund products, and the customer intended on using $429,000.00 in funds that she placed with the securities broker dealer for her retirement savings. The AWC stated that Monson directed stock trades in GC’s individual retirement account.
By June of 2015, the customer suffered about a sixty percent decline in account value. The AWC stated that commissions, investment losses and withdrawals were to blame. The customer was also made aware by this time that she had cancer. FINRA stated that Monson was cognizant of the decline in GC’s account which included $138,000.00 in withdrawals used to meet expenses incurred through the customer’s family business. That did not stop Monson from actively trading microcap securities in the customer’s account, even effecting routine in-and-out trades. Critically, Monson’s aggressive trading strategy was never adjusted to reflect that the customer had cancer.
The AWC stated that Monson neglected to consider the amount of commissions that he was charging to the customer through his active trading. He was ignorant of the harmful effects of those commissions on the customer’s account value. In fact, FINRA revealed that between June 1, 2015 and June 30, 2016, the customer’s account had a 9.07 annual turnover rate and 34.27 percent annual cost-to-equity ratio, necessitating a thirty-four percent return in the thirteen month timeframe in order for the customer to avoid losses. FINRA found that Monson’s one hundred eighty-seven trades effected through that period was excessive given the customer’s circumstances.
Monson’s trading was also deemed unsuitable by the regulator based on the fact that he was largely trading microcap stocks. These investments primarily consisted of companies with little operating history and minimal regulatory oversight, exposing the customer to increased risks of illiquidity, volatility and fraud. FINRA determined that Monson inappropriately allocated the customer’s account in these investments. At one point, nearly a quarter of the customer’s account was invested by Monson in Alpha Natural Resources, a stock which declined nearly eighty-five percent in value since purchased.
FINRA found that Monson neglected to have a reasonable basis for concluding that his excessive trading of microcap stocks was appropriate for the customer especially in light of the customer’s cancer diagnosis. Monson violated FINRA Rules 2010 and 2111 in this regard.
In addition, FINRA stated that Monson effected trades in GC’s account without authorization. The AWC revealed that on more than one hundred occasions, trades were placed at Monson’s discretion. The stockbroker’s exercise of discretion impacted Van Clemens customers DS and MH too. FINRA noted that Monson did not procure written authorization from GS, DS or MH to make decisions on what to trade, when to trade and at which prices to effect trades. Also, Van Clemens never permitted discretionary trading by the stockbroker in those customers’ accounts between 2015 and 2016. FINRA found Monson’s conduct violative of FINRA Rules 2010 and NASD Conduct Rule 2510(b).
Monson has been registered with Van Clemens since February 25, 2014.