Published on:

New York-based SW Financial Broker James W. Flower Under Investigation After FINRA Suspension

Silver Law Group is investigating Melville, New York-based SW Financial (CRD# 145012) broker James W. Flower (CRD# 2817701) after FINRA suspended him.

FINRA Suspends Flower

According to Flower’s FINRA BrokerCheck report, FINRA barred Flower after the regulatory organization found that Flower unsuitably recommended an exchange-traded note (“ETN”).

According to the disciplinary report, Flower recommended that 13 of his customers invest in the iPath S&P 500 VIX Short Term Futures ETN (“VXX”), which is a highly-volatile ETN. Flower did not have a sufficient understanding of how this ETN worked, as he incorrectly believed that the ETN traded inverse to the S&P 500 index and could be a hedge to an overall market decline.

VXX offers investor exposure to the returns of one- and two-month futures contracts on the CBOE Volatility Index, also known as the VIX index.  This index is designed to measure the market’s expectations of volatility in large cap U.S. stocks over a 30-day period.  Generally, VXX is expected to lose value as time moves on and, according to the disciplinary report, is rarely ever suitable as a long-term investment. It is generally held for brief periods of time measured in days for short-term speculation.

Due to Flower’s misperception, 13 of his customers collectively lost almost $250,000 due to holding the ETNs for periods ranging from two weeks to over a year. Flower is suspended for three months due to the unsuitable recommendations of this ETN.

Flower’s Lengthy CRD Report

Flower has a five other disclosures on his FINRA BrokerCheck report. He filed bankruptcy in January 2016.

In September 2015, two customers filed FINRA arbitrations against Flower. One of the FINRA arbitrations alleged churning and unsuitability and settled for $45,000. The other alleged overconcentration and excessive use of margin in addition to unsuitability.

In 2010, another customer filed a FINRA arbitration against Flower alleging misrepresentation of the characteristics and risks of multiple exchange-traded funds (“ETFs”) and failure to execute a stop loss order.  The complaint further alleged misrepresentation of the use of margin. The FINRA arbitration settled for over $67,000.

Aside from Flower’s BrokerCheck disclosures, Flower has been employed by 15 different firms in his 19-year career. Out of those 15 firms, seven have been permanently barred by FINRA. Prior to SW Financial employing Flower, Laidlaw & Company (UK) Ltd. (CRD# 119037) employed Flower.

Exchange-traded Notes (ETNs) and Exchange-traded Funds (ETFs)

An ETF is a security that tracks an index, a commodity, bonds or a basket of assets like an index fund.  ETFs trade like a common stock on a stock exchange.

An ETN is a type of unsecured, unsubordinated debt security first issued by an underwriting bank. Similar to other debt securities, ETNs have a maturity date and are backed only by the credit of the issuer. ETNs are similar to ETFs, but an ETN’s value can be affected by the creditworthiness of the issuing bank, adding an additional layer of risk.

Contact Our Securities Law Firm if You’ve Lost Money Investing

If you have invested with James W. Flower and SW Financial or Laidlaw & Company and have lost money doing so, you may be able to recover some or all of your losses.  Our lawyers are experienced in recovering investor losses due to broker and brokerage firm misconduct through FINRA arbitration.

Silver Law Group represents the interests of investors who have been the victims of investment fraud.  If you have questions about your legal rights, please contact Scott Silver of the Silver Law Group for a free consultation at ssilver@silverlaw.com or toll free at (800) 975-4345.

Contact Us

Free Consultation (800) 975-4345