The SEC charged a Houston-based oil and gas exploration and production company and its CEO for making fraudulent claims about its reserves.
Meanwhile, FINRA fined and censured one firm for excessive markups and another for failing to review nontraditional ETFs.
Failure to Review Nontraditional ETFs Gets Firm Fined, Censured
Meriden, Connecticut-based Infinex Investments, Inc. was censured by FINRA and fined $75,000 for failing to give nontraditional ETFs the same level of review that it did other new products it offered to its customers. It was also ordered to pay $287,171.75 in restitution to customers.
According to FINRA, not only did the firm allow its registered representatives to recommend nontraditional ETFs to customers without having performed reasonable due diligence so that they understood the ETFs’ risks and features, it also failed to ensure that such ETFs were not sold in customer-specific circumstances that made them unsuitable — such as to customers with low risk tolerance or conservative investment objectives.
That meant customers not only held unsuitable investments, they held the nontraditional ETFs longer than was appropriate based on recommendations in the ETFs’ prospectuses. That cost them.
The firm failed to properly supervise nontraditional ETF transactions, treating them instead the same way it treated traditional investments. It failed to flag nontraditional ETF transactions for evaluation; it also failed to monitor how long such investments were held and to train personnel properly regarding such investments.
The firm neither admitted nor denied the findings.
Oil and Gas Firm, CEO, Stock Pumper Charged by SEC on Fraudulent Claims
Houston American Energy Corp. and its CEO, John Terwilliger, were charged by the SEC for fraudulently claiming that a Colombian exploration concession in which Houston American only owned a fractional interest held between 1 billion and 4 billion barrels of oil reserves, and that the reserves were worth more than $100 per share to Houston American’s investors. The estimates were not only completely unreasonable, they were falsely attributed to the concession’s operator, whose actual estimates were much lower.