Doug Schmitz: Classic Advisor Sanctioned by SEC Over LETFs

Fargo-based financial advisor Doug Schmitz (CRD# 1771132) allegedly recommended unsuitable and over-concentrated investments in leveraged exchange-traded funds to his clients, according to a recent sanction by the Securities and Exchange Commission. Records provided by the Financial Industry Regulatory Authority indicate that he is currently registered as a broker with Classic and an investment advisor with Classic Asset Management.

Mr. Schmitz’s BrokerCheck report describes the recent SEC enforcement action against him. Filed in May 2023, the sanction alleged that he breached his fiduciary duty to his clients in connection with LETF investments. He allegedly recommended that his clients invest in the products “for extended periods of time and, in many cases, in significant concentrations” without a reasonable basis to do so, and in spite of the statement in the products’ prospectuses that they “carried unique risks, were designed to be held for no more than a single trading day, and required frequent monitoring.” The SEC found that Mr. Schmitz and his member firm, Classic Asset Management, misunderstood the products’ “fundamental characteristics” and did not have a reasonable belief that the LETFs were suitable for their clients. He and the firm additionally “failed to appropriately monitor the products’ performance,” according to the SEC, and “did not evaluate whether the LETFs were in the clients’ best interest throughout the holding period.” In connection with these findings, he was censured, issued a fine of $100,000, ordered to pay disgorgement of $523,086, and issued another monetary penalty of $115,027.

A second disclosure on Mr. Schmitz’s BrokerCheck report describes an investor complaint against him. Filed in 2020, it alleges that as a representative of Classic, he failed to uphold his fiduciary duty in connection with an LETF investment. The pending complaint alleges damages of $40,000.

According to the Financial Industry Regulatory Authority, Doug Schmitz holds 35 years of securities industry experience. Based in Fargo, North Dakota, he has been a broker with Classic since 2012 and an investment advisor with Classic Asset Management since 2006. His credentials include the passage of six securities industry qualifying exams: the General Securities Principal Examination, or Series 24; the General Securities Representative Examination, or Series 7; the Securities Industry Essentials Examination, or SIE; the Uniform Securities Agent State Law Examination, or Series 63; the Uniform Securities Agent State Law Examination, or Series 65; and the Uniform Combined State Law Examination, or Series 66. He is currently licensed in Arizona, Colorado, Iowa, Minnesota, Nebraska, North Dakota, South Dakota, and Texas. (Information current as of May 14, 2023.)

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