FINRA Fines Pinnacle Investments for Failing to Supervise Trading
Pinnacle Investments was reportedly censured and fined by securities regulators this week. According to The Financial Industry Regulatory Authority (FINRA), from June 30, 2020, through September 2024, Pinnacle reportedly violated Rule 15l-1 of the Securities Exchange Act of 1934 (Reg BI), as well as FINRA Rules 3110 and 2010. The alleged violations were in connection with the failure to establish, maintain, and enforce a reasonable supervisory system concerning recommendations of inverse, or leveraged exchange traded funds or notes (NT-ETPs).
Also, from May 2021, through June 2024, Pinnacle allegedly failed to establish, maintain, and enforce a supervisory system reasonably designed to monitor for discretionary and/or unauthorized trading in customer accounts.
In addition, from 2016 to 2022, the firm reportedly failed to conduct timely branch inspections, in violation of FINRA Rules 3110 and 2010. For these three supervisory violations, Pinnacle is censured, fined $65,000, ordered to pay restitution of $53,847.99 plus interest, and has agreed to an undertaking.
Inverse/ Leveraged Exchange Traded Products (NT-ETPs)
Non-Traditional Exchange-Traded Products (NT-ETPs) are complex financial instruments that aim to deliver a multiple of, the inverse of, or a combination of both relative to the daily performance of a specific index or benchmark. These products—categorized as leveraged, inverse, or leveraged-inverse ETPs—are designed for short-term use, typically a single trading day, and are rebalanced daily to maintain their targeted exposure. Because of this daily reset feature, their performance over periods longer than one day can significantly deviate from the underlying index or benchmark due to the effects of compounding.
FINRA has cautioned that NT-ETPs are generally unsuitable for retail investors who intend to hold them for more than one day. The notice emphasized that firms must implement supervisory systems to ensure compliance with applicable rules and that brokers must fully understand the products’ features and risks before making recommendations.
Pinnacle allegedly failed to identify that a registered representative was recommending that his customers buy and hold NT-ETPs for durations that were not in their best interest, according to FINRA. For instance, between late September and early October 2022, this registered representative reportedly recommended NT-ETPs to 13 retail customers who held them for periods ranging from 18 days to 110 days, resulting in $53,847.99 in realized losses.
Unauthorized Trading
According to FINRA’s findings, Pinnacle allegedly failed to detect at least one registered representative’s pattern of same-day, same-security trades in the accounts of multiple unrelated customers through 2023 and reportedly failed to take steps to verify that the registered representative was contacting each customer before every trade to obtain authorization as was required.
Broker Due Diligence
Under the SEC’s “Regulation Best Interest” standard, brokerage firms must conduct due diligence before recommending investments. If a financial advisor fails to assess risk suitability and investors suffer losses, they may have grounds for a complaint or lawsuit.
Lawsuit Options: Individual FINRA Arbitration vs. Class Action
If you suffered losses with your financial advisor you may have two main legal paths:
- FINRA Arbitration: Best suited for investors with significant losses, typically over $100,000.
- Class Action Lawsuit: More appropriate for multiple investors with smaller claims that may not justify individual litigation.
FINRA Lawsuits for Investment Losses
If you experienced investment losses with Pinnacle Investments LLC you may be able to recover compensation through FINRA arbitration.
For a free consultation with a securities attorney, contact The White Law Group at 888-637-5510 today.
About The White Law Group
The White Law Group is a national securities fraud and investor protection law firm with offices in Chicago, Illinois, and Seattle, Washington. The firm represents investors nationwide in claims against brokerage firms through FINRA arbitration. Visit our homepage for more information on investor recovery options.
Last modified: June 9, 2025
