Raymond Smith Suspended by FINRA for Alleged Misconduct

Raymond Smith (CRD #: 731506), a broker registered with Smith, Brown & Groover, has been suspended by FINRA, according to his BrokerCheck record, accessed on December 12, 2024. Investors may have also engaged his services through SBG Wealth Management. Read on to learn more about his alleged conduct as a broker.

FINRA Suspension

On November 6, 2024, Raymond Smith consented to the entry of findings that he and Smith, Brown, & Groover (SBG) allegedly recommended a trading strategy from July 2014 to February 2018 without fully understanding the risks and features associated with that strategy or the exchange-traded note (ETN) it relied on.

According to a Letter of Acceptance, Waiver & Consent (AWC), the trading strategy allegedly primarily invested in an inverse and volatility-linked ETN, a complex and high-risk investment designed to generate returns when the volatility of its underlying index declines.

The ETN’s prospectus and pricing supplement allegedly disclosed that investors could potentially lose all of their investment when volatility spikes, and that it may not be suitable for investors intending to hold the investment for longer than a day.

The AWC alleges that Raymond Smith did not fully understand the basic features of the ETN, including how the issuer maintained its inverse exposure to the underlying volatility index//. He allegedly invested clients in the ETN for an average of 72 days.

Further, Raymond Smith and SBG allegedly conducted testing of their trading strategy that relied on incomplete data and resulted in over-estimation of potential returns.

In February 2018, a surge in market volatility allegedly caused the ETN to decline in price and the issuer to call the ETN. This allegedly resulted in holders of the ETN suffering near-total losses.

Alleged Failure to Supervise

Further, the AWC alleged that Raymond Smith and SBG failed to establish a system of supervision reasonably designed to achieve compliance with the suitability obligations of FINRA Rule 2111.

For example, the AWC alleged that the firm had no policy or procedure concerning reasonable-basis analyses of ETNs or for evaluating investors’ concentration in the recommended investment strategy. They also allegedly failed to reasonably train brokers regarding the ETN and trading strategy.

The AWC concluded that these allegations constituted violations of FINRA Rules 2111, 2010, and 3110 as well as NASD Rule 3010 on the part of Raymond Smith and SBG.

FINRA Rule 2111

FINRA Rule 2111 defines suitable investments as securities that fit an investor’s profile. Brokers must use the information in an investor’s profile, such as their risk tolerance, tax status, and investing experience when making recommendations.

Investors who rely on brokers for recommendations may be able to recover their losses through FINRA arbitration.

FINRA Rule 2010

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

FINRA Rule 3110

FINRA Rule 3110 requires that firms establish systems of supervision to maintain their compliance with securities regulations. This includes appointing supervisors and providing them with Written Supervisory Procedures (WSPs).

Sanctions

Raymond Smith consented to the following sanctions:

• 6-month suspension from associating with FINRA members in all capacities, from December 2, 2024, to June 1, 2025
• 4-month suspension from associating with FINRA members in a all principal capacities, from June 2, 2025, to October 1, 2025
• $15,000 fine

Smith, Brown, & Groover consented to the following sanctions:

• Censure
• Partial restitution of $2 million

You can access the full AWC here.

Investor Disputes

On October 23, 2019, an investor alleged that Raymond Smith failed to supervise with regard to a volatility-linked product. This dispute was settled for $554,406.

In a dispute filed on May 23, 2019, an investor named Raymond Smith in allegations of fraud, negligence, negligent and intentional misrepresentation and omission, failure to supervise, and violation of Georgia securities laws and statutes as well as the Investment Advisers Act of 1940. This dispute was settled for $425,000.

On February 11, 2019, multiple investors filed a dispute alleging that Smith, Brown & Groover used discretion to invest in volatility-linked products that were unsuitable for the client given their risk tolerance and stated investment objectives, and because they were not sophisticated or institutional investors. This dispute was settled for $132,500.

FINRA Rule 2020

FINRA Rule 2020 prohibits the use of manipulation, deception, and other fraudulent methods to influence investors’ decisions. Misrepresenting an investment’s risks, limitations, or requirements violates this rule.

Background Information

Raymond Smith has passed the following exams:

• Compliance Officer Examination – Series 14
• Municipal Securities Principal Examination – Series 53
• Financial and Operations Principal Examination – Series 27
• General Securities Principal Examination – Series 24
• Municipal Securities Representative Examination – Series 52TO
• Operations Professional Examination – Series 99TO
• Securities Trader Exam – Series 57TO
• Securities Industry Essentials Examination – SIE
• Limited Representative-Equity Trader Exam – Series 55
• General Securities Representative Examination – Series 7
• Uniform Investment Adviser Law Examination – Series 65
• Uniform Securities Agent State Law Examination – Series 63

Raymond Smith is a registered broker in 28 states and the District of Columbia. He is also a registered investment adviser in Georgia, North Carolina, Ohio, and Tennessee.

Kurta Law Can Help

If you worked with Raymond Smith 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 that 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.