Charges Settled by Securities America Advisors, Inc.

On November 13 2020, Securities America Advisors, Inc., q wholly owned subsidiary of Ladenburg Thalmann Financial Services Inc., agreed to settled charges that it failed to adopt and implement policies and procedures reasonably designed to prevent investments in two volatility-linked exchange-traded products (“ETPs”) that were not suitable for SAA clients. SAA, among other things, failed to implement its policies and procedures that required SAA investment adviser representatives (“IARs”) to have an “adequate basis” to make recommendations to, and investments for, clients that were suitable in light of their investment profiles. SAA additionally failed to adopt reasonably designed policies and procedures directed specifically at volatility-linked ETPs. SAA clients suffered significant losses from investments in these products. SAA IARs invested clients in, or recommended for their clients, a volatility-linked security called the Velocity Shares Daily Inverse VIX Short Term ETNs linked to the S&P 500 VIX Short-Term Futures Index (“XIV”) and another volatility-linked security called the ProShares VIX Short-Term Futures ETF (“VIXY”). The offering materials for XIV provided that the product was for sophisticated investors to manage daily trading risks, and the offering materials for VIXY similarly provided that that product was for investors who understood the consequences of seeking exposure to VIX futures contracts and was for short-term investment horizons. SAA had no policies and procedures directed specifically at volatility-linked ETPs even though it knew that certain IARs were investing in XIV and VIXY on behalf of retail clients or were recommending that retail clients buy and hold the products for extended periods. SAA also failed to implement existing policies and procedures detailing the IARs fiduciary obligations owed to clients. These policies and procedures provided that an investment adviser had an obligation “to make suitable recommendations to clients in light of their needs, financial circumstances and investment objectives” and “to have an adequate basis in fact for its recommendations.” SAA agreed to pay a total of $603,776 of disgorgement, which $600,000 is a penalty and disgorgement of about $3,000.  []