Sigma Financial Corporation

Sigma Financial Corporation (CRD #: 14303) is a brokerage firm with headquarters in Ann Arbor Michigan. It is affiliated with Parkland and is under the common ownership of Sigma Planning Corporation (SPC). Sigma has approximately 900 registered representatives, many of whom are also investment advisors registered with SPC. Most of their representatives are also licensed to sell life insurance and annuities.

Products Offered by Sigma Financial

In addition to stocks and bonds, Sigma Financial Corporation also offers the following potentially risky products:

• Penny stocks
• Exchange-traded funds
• Mortgage-backed securities
• Mutual funds
• Unit Investment Trusts (UITs)
• Variable Annuities
• Variable Universal Life Insurance
• Alternative investments, including non-traded Real Estate Investment Trusts (NT-REITs) and Business Development Companies (BDCs).
• Options

Sigma brokers can make recommendations and purchase and sell securities. SPC, the brokerage firm’s affiliated investment advisory firm, can provide you with advisory services, which include executing trades at the investment advisor’s discretion. Make sure you know what type of account you want as well as the fees involved. Sigma suggests that investors ask: “Given my financial situation, should I choose an investment advisory service? Should I choose a brokerage service? Should I choose both types of services? Why or why not?”

Brokerage Account Fees

Investors pay fees even if they lose money. Note that the following fees apply to brokerage services – there are separate fees that apply to advisory accounts.

• Per-transaction fees: Each time you buy or sell a security, there is a transaction fee that is also called a “commission.”
• For securities sold by prospectus, Sigma earns a commission identified in the prospectus. For other securities, the Sigma representative determines the commission, up to a maximum percentage that varies based on the amount of principal as well as the type of security.
• Account opening fees
• Maintenance fees
• Closing fees
• Early surrender fees
• Mutual funds, exchange-traded funds, and other investment company products come with internal fees and expenses.
• Certain products may come with surrender charges.

Conflicts of Interest

The fees listed above create conflicts of interest, which are further detailed in the Customer Relationship Summary (Form CRS).

• The per-transaction fees create an incentive for brokers to trade more often.
• Sigma receives commissions from insurance companies, mutual fund companies, and other product companies. Customers pay the commissions associated with securities. Sigma therefore has an incentive to recommend products that offer better commissions.
• Many product companies, retirement plan providers, and alternative investment providers offer revenue-sharing agreements. These are separate from sales commissions.

Regulatory Actions

Sigma Financial Corporation – as well as a select number of its representatives – have allegations of misconduct on their records. Sigma’s detailed BrokerCheck record reveals 15 regulatory events and 11 arbitration cases.

New York State Department of Financial Services: Stipulation and Consent      

On September 30, 2020, the New York State Department of Financial Services alleged that Sigma provided materially incorrect information on Sigma’s original application to act as a life broker. Sigma allegedly failed to disclose the following:

• Sigma and its owner, Jerome Rydell, were named in at least 55 NASD and FINRA arbitration proceedings involving allegations of breach of fiduciary duty, fraud, or misrepresentation.
• Sigma and Rydell allegedly faced two civil litigations involving allegations of breach of fiduciary duty, fraud, or misrepresentation.
• Sigma was allegedly fined a total of 14 times by FINRA, four state insurance regulators, and one state securities regulator.

$100,000 Fine Following Allegations Involving Non-Traditional ETFs

On March 7, 2019, Sigma entered into an Acceptance, Waiver, and Consent agreement (AWC) with FINRA, a type of agreement that allows firms to settle with FINRA without admitting or denying the findings.

The AWC alleges that Sigma failed to establish and maintain a system reasonably designed to supervise the sales of leveraged, inverse, and inverse-leveraged exchange-traded funds, also known as “non-traditional ETFs.”  Non-traditional ETFs can be unsuitable for investors because they are complex and not meant to be held for more than one trading session.

According to the AWC, 110 Sigma representatives executed 1,475 transactions involving non-traditional ETFs in 304 retail customer accounts. The transactions allegedly totaled $26.5 million and generated $292,000 in commissions.

Terms of the AWC

As part of the terms of the AWC, Sigma consented to a $100,000 fine. You can see a link to the AWC here.

$100,000 Fine Following UIT Allegations

Another AWC, dated August 1, 2016, alleged that Sigma representatives failed to apply applicable UIT sales discounts. This allegedly led to a failure to apply sales charge discounts to 339 eligible UIT purchases and excessive sales charges of approximately $92,053.63.

Terms of the AWC

As part of the terms of the AWC, Sigma consented to a fine of $100,000 and to pay $92,053.63 in restitution to clients, plus interest. You can read a copy of the AWC here.

Sigma Representatives

Kurta Law is aware of the following Sigma representatives with allegations on their records. This is by no means a complete list.

• Investors should know about this Sigma representative with a six-figure dispute on their record.
• Another investor allegedly misrepresented REITs.

Kurta Law Can Help

If you lose money working with a Sigma broker, contact a securities attorney today. Our attorneys do not collect a fee unless we win and offer case evaluations for free. Call (877) 600-0098 or email info@kurtalawfirm.com.