Securities Lawyers Blog
According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor David Krumrey (Krumrey), in January 2018, was sanctioned by FINRA and barred from the financial industry concerning his failure to respond to an investigation into the sales of leveraged exchanged traded funds (Non-Traditional ETFs). Krumrey was previously terminated by his employer Oppenheimer & Co. Inc (Oppenheimer) because he attempted to settle a complaint away from the firm. In addition, Krumrey has been subject to five customer complaints concerning his securities activity. These investors have alleged in losses stemming allegations of unsuitable Non-Tradition ETF trading.
In January 2018 FINRA barred Krumrey for failing to respond to FINRA’s requests for information.
In January 2019 a FINRA panel rendered a ruling that Krumrey’s employer – Oppenheimer – was liable for investments he made to an investor. The claims involved claims of breach of fiduciary duty, negligence, negligent supervision, respondeat superior, unjust enrichment, and violations of the Louisiana Securities Law. The causes of action relate to securities including Amarin Corp. PLC ADR and Energy XXI Limited, and exchange-traded notes issued by Barclays.
As a background, Non-Traditional ETFs behave drastically different and have different risk qualities from traditional ETFs. While traditional ETFs seek to mirror an index or benchmark, Non-Traditional ETFs use a combination of derivatives instruments and debt to multiply returns on underlining assets, often attempting to generate 2 to 3 times the return of the underlining asset class. Non-Traditional ETFs are also used to earn the inverse result of the return of the benchmark.