Benjamin F. Edwards & Company, Incorporated

Allegations: IA RELEASE 40-5151 / MARCH 11, 2019: THE SECURITIES AND EXCHANGE COMMISSION DEEMS IT APPROPRIATE AND IN THE PUBLIC INTEREST THAT PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE INSTITUTED AGAINST BENJAMIN F. EDWARDS & CO., INC. ("RESPONDENT"). ON THE BASIS OF THIS ORDER AND RESPONDENT'S OFFER, THE COMMISSION FINDS THAT THESE PROCEEDINGS ARISE OUT OF BREACHES OF FIDUCIARY DUTY AND INADEQUATE DISCLOSURES BY THE RESPONDENT IN CONNECTION WITH ITS MUTUAL FUND SHARE CLASS SELECTION PRACTICES AND THE FEES IT RECEIVED. AT TIMES DURING THE RELEVANT PERIOD, RESPONDENT PURCHASED, RECOMMENDED, OR HELD FOR ADVISORY CLIENTS MUTUAL FUND SHARE CLASSES THAT CHARGED 12B-1 FEES INSTEAD OF LOWER-COST SHARE CLASSES OF THE SAME FUNDS FOR WHICH THE CLIENTS WERE ELIGIBLE. RESPONDENT RECEIVED 12B-1 FEES IN CONNECTION WITH THESE INVESTMENTS. RESPONDENT FAILED TO DISCLOSE IN ITS FORM ADV OR OTHERWISE THE CONFLICTS OF INTEREST RELATED TO (A) ITS RECEIPT OF 12B-1 FEES, AND/OR (B) ITS SELECTION OF MUTUAL FUND SHARE CLASSES THAT PAY SUCH FEES. DURING THE RELEVANT PERIOD, RESPONDENT RECEIVED 12B-1 FEES FOR ADVISING CLIENTS TO INVEST IN OR HOLD SUCH MUTUAL FUND SHARE CLASSES. AS A RESULT OF THE CONDUCT, RESPONDENT WILLFULLY VIOLATED SECTIONS 206(2) AND 207 OF THE ADVISERS ACT. Status: Final Sanction Detail: THE RESPONDENT SHALL CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTIONS 206(2) AND 207 OF THE ADVISERS ACT. RESPONDENT IS CENSURED, SHALL PAY DISGORGEMENT OF $3,151,205.81 AND PREJUDGMENT INTEREST OF $294,058.93, AND SHALL COMPLY WITH THE UNDERTAKINGS ENUMERATED IN THE OFFER OF SETTLEMENT. Summary: RESPONDENT HAS SUBMITTED AN OFFER OF SETTLEMENT WHICH THE COMMISSION HAS DETERMINED TO ACCEPT. IN VIEW OF THE FOREGOING, THE COMMISSION DEEMS IT APPROPRIATE IN THE PUBLIC INTEREST TO IMPOSE THE SANCTIONS AGREED TO IN THE RESPONDENT'S OFFER. ACCORDINGLY, IT IS ORDERED THAT RESPONDENT SHALL CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTIONS 206(2) AND 207 OF THE ADVISERS ACT. RESPONDENT IS CENSURED, SHALL PAY DISGORGEMENT OF $3,151,205.81 AND PREJUDGMENT INTEREST OF $294,058.93, AND SHALL COMPLY WITH THE UNDERTAKINGS ENUMERATED IN THE OFFER OF SETTLEMENT. RESPONDENT SELF-REPORTED TO THE COMMISSION THE VIOLATIONS DISCUSSED IN THIS ORDER PURSUANT TO THE DIVISION OF ENFORCEMENT'S SHARE CLASS SELECTION DISCLOSURE INITIATIVE ("SCSD INITIATIVE"). ACCORDINGLY, THIS ORDER AND RESPONDENT'S OFFER ARE BASED ON THE INFORMATION SELF-REPORTED BY RESPONDENT.

Allegations: THE SECURITIES AND EXCHANGE COMMISSION (SEC) DEEMS IT APPROPRIATE AND IN THE PUBLIC INTEREST THAT PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE, AND HEREBY ARE, INSTITUTED PURSUANT TO SECTION 15(B) OF THE SECURITIES EXCHANGE ACT OF 1934 (EXCHANGE ACT), AND SECTIONS 203(E) AND 203(K) OF THE INVESTMENT ADVISERS ACT OF 1940 (ADVISERS ACT) AGAINST BENJAMIN F. EDWARDS & COMPANY, INC. (BENJAMIN EDWARDS). THE SEC FINDS THAT THIS MATTER CONCERNS BENJAMIN EDWARDS'S FAILURE REASONABLY TO SUPERVISE CERTAIN OF ITS REGISTERED REPRESENTATIVES (BROKERAGE REPRESENTATIVES) AND INVESTMENT ADVISORY REPRESENTATIVES (ADVISORY REPRESENTATIVES) WHO MADE UNSUITABLE RECOMMENDATIONS TO ITS RETAIL BROKERAGE CUSTOMERS AND ADVISORY CLIENTS THAT THEY BUY AND HOLD FOR EXTENDED PERIODS TWO COMPLEX EXCHANGE TRADED PRODUCTS THAT WERE INTENDED FOR SHORT-TERM HOLDING (COMPLEX ETPS). THESE BROKERAGE REPRESENTATIVES MADE THESE RECOMMENDATIONS TO BUY AND HOLD THE COMPLEX ETPS WITHOUT HAVING A REASONABLE BASIS TO DO SO. SIMILARLY, THE BROKERAGE AND ADVISORY REPRESENTATIVES FAILED TO MAKE A REASONABLE DETERMINATION THAT THESE INVESTMENTS WERE SUITABLE FOR CERTAIN OF THE CUSTOMERS AND CLIENTS TO WHOM THEY RECOMMENDED THE COMPLEX ETPS, BASED ON THOSE RETAIL CUSTOMERS' AND CLIENTS' INVESTMENT OBJECTIVES, RISK TOLERANCE, AND FINANCIAL CONDITION. A NUMBER OF THESE BROKERAGE AND ADVISORY REPRESENTATIVES ALSO MISLED THEIR CUSTOMERS AND CLIENTS ABOUT THE COMPLEX ETPS' BENEFITS AND RISKS. BENJAMIN EDWARDS FAILED REASONABLY TO IMPLEMENT ITS SUPERVISORY POLICIES AND PROCEDURES TO PREVENT AND DETECT THESE VIOLATIONS AND FAILED TO IMPLEMENT POLICIES AND PROCEDURES REASONABLY DESIGNED TO PREVENT ITS ADVISORY REPRESENTATIVES FROM MAKING UNSUITABLE RECOMMENDATIONS TO ITS CLIENTS. FROM JANUARY 2016 THROUGH MARCH 2020, CERTAIN BROKERAGE AND ADVISORY REPRESENTATIVES RECOMMENDED THAT MANY OF THEIR RETAIL BROKERAGE CUSTOMERS AND ADVISORY CLIENTS BUY AND HOLD ONE OR MORE OF THE COMPLEX ETPS FOR MANY MONTHS AT A TIME, AS A HEDGE AGAINST THE ANTICIPATED MARKED DECLINE. THE COMPLEX ETPS WERE: (1) THE IPATH S&P 500 VIX SHORT-TERM FUTURES ETN, AND (2) THE PROSHARES VIX SHORT-TERM FUTURES ETF. THE OFFERING DOCUMENTS GENERALLY DISCLOSED THAT THE PRODUCTS CARRIED A HIGHER RISK OF SIGNIFICANT LOSSES IF HELD FOR EXTENDED PERIODS. THE BROKERAGE AND ADVISORY REPRESENTATIVES MISUNDERSTOOD THE COMPLEX ETPS, OR IGNORED THESE DISCLOSURES, AND MADE UNSUITABLE RECOMMENDATIONS TO CUSTOMERS AND CLIENTS THAT THEY BUY AND HOLD THE COMPLEX ETPS. BENJAMIN EDWARDS FAILED REASONABLY TO IMPLEMENT ITS SUPERVISORY POLICIES AND PROCEDURES THAT WERE INTENDED TO PROVIDE ASSURANCE THAT ITS BROKERAGE REPRESENTATIVES HAD A REASONABLE BASIS TO RECOMMEND COMPLEX PRODUCTS SUCH AS THE COMPLEX ETPS TO THEIR CUSTOMERS; FAILED TO IMPLEMENT ITS SUPERVISORY POLICIES AND PROCEDURES THAT WERE INTENDED TO PROVIDE ASSURANCE THAT ITS BROKERAGE REPRESENTATIVES AND ADVISORY REPRESENTATIVES MADE REASONABLE DETERMINATIONS THAT THE INVESTMENTS IN COMPLEX ETPS WERE SUITABLE FOR EACH INDIVIDUAL BROKERAGE CUSTOMER OR ADVISORY CLIENT; IN ADDITION, AND FAILED TO IMPLEMENT ADVISORY POLICIES AND PROCEDURES REASONABLY DESIGNED TO PREVENT UNSUITABLE RECOMMENDATIONS THAT THEIR RETAIL ADVISORY CLIENTS BUY AND HOLD THE COMPLEX ETPS FOR EXTENDED PERIODS. AS A RESULT, BENJAMIN EDWARDS'S RETAIL BROKERAGE CUSTOMERS AND ADVISORY CLIENTS BOUGHT AND HELD THE COMPLEX ETPS FOR EXTENDED PERIODS IN APPROX. 201 ACCOUNTS AND LOST ON AVERAGE MORE THAN 41 PERCENT OF THE AMOUNTS THEY INVESTED. BENJAMIN EDWARDS FAILED REASONABLY TO SUPERVISE ITS BROKERAGE AND ADVISORY REPRESENTATIVES WITH RESPECT TO THEIR UNSUITABLE RECOMMENDATIONS TO CUSTOMERS AND CLIENTS, WITHIN THE MEANING OF SECTION 15(B)(4)(E) OF THE EXCHANGE ACT AND SECTION 203(E)(6) OF THE ADVISERS ACT, AND WITH A VIEW TO PREVENTING AND DETECTING THEIR VIOLATIONS OF SECTIONS 17(A)(2) AND 17(A)(3) OF THE SECURITIES ACT. BENJAMIN EDWARDS VIOLATED SECTION 206(4) AND RULE 206(4)-7 THEREUNDER. Status: Final Sanction Detail: IT IS HEREBY ORDERED THAT BENJAMIN EDWARDS CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTION 206(4) OF THE ADVISERS ACT AND RULE 206(4)-7 THEREUNDER; IS CENSURED FOR FAILING REASONABLY TO SUPERVISE WITHIN THE MEANING OF SECTION 15(B)(4)(E) OF THE EXCHANGE ACT AND SECTION 203(E) OF THE ADVISERS ACT AND FOR ITS WILLFUL VIOLATIONS OF SECTION 206(4) OF THE ADVISERS ACT AND RULE 206(4)-7 THEREUNDER; AND SHALL PAY DISGORGEMENT OF $31,417.62, PREJUDGMENT INTEREST OF $3,716.74, AND A CIVIL MONETARY PENALTY OF $650,000. Summary: BENJAMIN EDWARDS HAS SUBMITTED AN OFFER OF SETTLEMENT, WHICH THE COMMISSION HAS DETERMINED TO ACCEPT. BENJAMIN EDWARDS WILLFULLY VIOLATED SECTION 206(4) AND RULE 206(4)-7 THEREUNDER. ACCORDINGLY, IT IS HEREBY ORDERED THAT BENJAMIN EDWARDS CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTION 206(4) OF THE ADVISERS ACT AND RULE 206(4)-7 THEREUNDER; IS CENSURED FOR FAILING REASONABLY TO SUPERVISE WITHIN THE MEANING OF SECTION 15(B)(4)(E) OF THE EXCHANGE ACT AND SECTION 203(E) OF THE ADVISERS ACT AND FOR ITS WILLFUL VIOLATIONS OF SECTION 206(4) OF THE ADVISERS ACT AND RULE 206(4)-7 THEREUNDER; AND SHALL PAY DISGORGEMENT OF $31,417.62, PREJUDGMENT INTEREST OF $3,716.74, AND A CIVIL MONETARY PENALTY OF $650,000.