The Financial Industry Regulatory Authority Inc. has barred Dominic Tropiano, a former broker with American Northcoast Securities in Cleveland, Ohio, for making trades without customer knowledge in nontraditional ETFs that were unsuitable for those clients.
Finra said that Mr. Tropiano, who left the firm in 2016 and hasn't worked in the securities industry since, solicited the purchase and sale of leveraged exchange-traded funds in the accounts of at least 47 of America Northcoast's customers between May 2015 and April 2016.
In a letter of acceptance, waiver and consent, Finra said that Mr. Tropiano made 866 securities transactions, involving 15 different nontraditional ETFs, during that time period. It said that he did not understand the securities' daily reset feature, the compounding of the "tracking error" (the divergence between the nontraditional ETF's price and the price of the index or benchmark), and the various other risks of the products, including the daily exchange rate risk and the volatility of the underlying swap agreements, futures contracts, and options.
Finra also said that Mr. Tropiano made 33 ETF transactions in one customer's account and 19 in the account of another customer without the knowledge or consent of either.
No restitution was ordered, Finra said, because American Northcoast paid $1,526,500 million to its customers for the losses they suffered as a result of Mr. Tropiano's actions.