Douglas Schmitz Ordered to Cease and Desist by SEC

Douglas Schmitz (CRD #: 1771132), a broker registered with Classic, was censured and ordered to cease and desist by the SEC, according to his BrokerCheck record, accessed on July 4, 2023. Investors may have also worked with him through Classic Asset Management or Financial Strategies Group. If you have questions about his alleged conduct as a broker, keep reading.

SEC Regulatory Action

On May 4, 2023, the Securities and Exchange Commission filed cease-and-desist proceedings against Douglas Schmitz and investment advisory firm Classic Asset Management, alleging breaches of the fiduciary duty of care and compliance.

The SEC alleged that Douglas Schmitz, as owner and an investment advisor with Classic Asset Management, invested clients in leveraged exchange-traded funds (LETFs) for extended periods of time and often in significant concentrations.

He allegedly did not have a reasonable basis to do so, and the SEC further alleged that these decisions were inconsistent with these funds’ prospectuses. The LETFs’ prospectuses allegedly stated that they carried unique risks, were designed to be held for only a single trading day, and required frequent monitoring.

Douglas Schmitz and Classic Asset Management allegedly misunderstood these characteristics and therefore lacked a reasonable belief that these LETFs were in the best interests of their clients. They allegedly also failed to appropriately monitor the LETFs’ performance and evaluate whether they were in their clients’ best interests throughout their holding period.

Lastly, Classic Asset Management allegedly failed to establish and implement policies and procedures reasonably designed to prevent violations of the Investment Advisers Act of 1940.

The SEC alleged that Douglas Schmitz willfully violated Section 206(2) of the Investment Advisers Act.

Investment Advisers Act of 1940

Sections 206(2) of the Investment Advisers Act of 1940 forbid engagement in fraudulent and deceptive practices or transactions.

Sanctions

The SEC ordered Douglas Schmitz to cease and desist from violations of Section 206(2) of the Investment Advisers Act of 1940, censured him, and ordered him to pay the following:

• $100,000 fine
• $523,086 disgorgement
• $115,027 additional monetary sanction

Investor Dispute

On April 29, 2020, multiple investors filed a dispute alleging that Douglas Schmitz failed to execute a trade in February 2020. They sought $750,000 in damages and received a settlement of $275,000.

FINRA Rule 2010

FINRA Rule 2010 holds brokers to high standards of commercial honor and just and equitable principles of trade.

Bankruptcy

On September 16, 2015, Douglas Schmitz filed for bankruptcy. It is currently listed as pending.

Background Information

Douglas Schmitz has passed the following exams:

• Series 66 – Uniform Combined State Law Examination
• Series 65 – Uniform Investment Adviser Law Examination
• Series 63 – Uniform Securities Agent State Law Examination
• SIE – Securities Industry Essentials Examination
• Series 7 – General Securities Representative Examination
• Series 24 – General Securities Principal Examination

Douglas Schmitz is a registered broker in eight states and a registered investment adviser in North Dakota and Texas.

He has also worked for the following firms:

• Northstar Financial Partners (CRD#:107708)
• Fintegra (CRD#:16741)
• Questar Asset Management (CRD#:133358)
• Questar Capital Corporation (CRD#:43100)
• Multi-Financial Securities Corporation (CRD#:10299)
• Walnut Street Securities (CRD#:15840)
• FSC Securities (CRD#:7461)

Kurta Law Can Help

If you worked with Douglas Schmitz and you have concerns about your investments, please contact us today at 877-600-0098 or info@kurtalawfirm.com for a free consultation.

For over 20 years, Kurta Law has advocated on behalf of investors who want to recover their investment losses from brokers and brokerage firms. Kurta Law is a nationally recognized law firm and exclusively represents investors against brokers and brokerage firms on a contingency basis. This means that the firm only earns a fee if our securities attorneys recover money on your behalf.