Ameriprise Financial and former Wisconsin broker Paul Julian Renard have been sued in a Wisconsin District Court over Renard’s inappropriate sales of leveraged and inverse exchange-traded funds (ETFs) to customers and for fabricating the facts surrounding those sales.
The lawsuit was filed on August 8 in the Green Bay Division of the Eastern District of Wisconsin court by a pair of Milwaukee law firms, Halling & Cayo and Hansen Reynolds Dickinson Crueger. The lawsuit was filed on behalf of three investors: William Bourbonnais, Thomas Tesch and Donna Tesch. Also named as a defendant in the suit is SII Investments, a full-service independent broker-dealer through which Renard also conducted business.
The plaintiffs’ attorneys are hoping to have the court judge elevate this case to class action status, which would allow all other retail investors with similar losses to be included in any monetary compensation.
Risk profile
The case alleges that Renard inappropriately recommended to his clients that they purchase and hold non-traditional leveraged and inverse ETFs, despite being considered highly speculative and only appropriate for very short-term investment. None of the clients were marked as having a speculative trading strategy as their objective.
The case claims that Renard repeatedly sold Bourbonnais units of risky leveraged/inverse ETFs which he held for several years. The client allegedly lost 89% of his total ETF investments when he sold his shares years later.
The lawsuit alleges similar claims as they related to multiple sales of such speculative ETFs to Thomas and Donna Tesch which they held for more than three years. The Teschs, according to the lawsuit, lost 90% of their investment when they sold their shares.
Monitoring
Ameriprise and SII are cited as being negligent in failing to ensure the suitability of the ETF sales to clients and making no effort to monitor or otherwise investigate the clients’ trading strategy. In addition, through remarks made by Ameriprise executives as part of a related 2013 lawsuit hearing involving Renard, Ameriprise charged that over a two-year period Renard “doctored” ETF order tickets, marking them as being unsolicited requests for purchases proactively made by his clients, while Renard knew that he had suggested the purchases to his clients and that these were unsolicited transactions. Renard said at the time that his supervisor told him to mismark the order tickets as unsolicited.
Moreover, As of 25 August 2009, Ameriprise had released a list of several dozen ETFs that its brokers were prohibited from selling to clients, including those from sponsors Deutsche Bank, Direxion Funds, Horizons, MacroShares, MarketVectors, PowerShares, ProShares and UBS.
None of the ETF sponsors were directly or indirectly named as a defendant in this lawsuit, nor were any accused of any wrongdoing.
Regulatory record
According to records held by the US Financial Industry Regulatory Authority (Finra), Renard had been employed as a registered representative with SII from December 1998 until August 2009, and then again from August 2011 through August 2013, and had been employed as a broker with Ameriprise from August 2009 until June 2011 when he was fired. The records show that Ameriprise terminated Renard on June 2011 for “company policy violations including solicitation of prohibited securities.”
Eventually, Finra fined Renard $60,000 and suspended him from working in the brokerage industry in any capacity for two years, a sentence which began in October 2013 and will expire October 2015. Renard is not currently registered with any brokerage firm, according to Finra records.
A review of Renard’s regulatory record with Finra shows that he has had as many as 22 individual customer complaints with many related to sales of leveraged/inverse ETFs as well as real estate investment trusts.
Renard could not be reached for comment. Ameriprise had not returned an email request for comment. A request made by SRP to SII for comment was not immediately answered by press time.
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