Customer #1.    RR recommended that his 85-year-old customer invest the proceeds from the sale of a farm in unit investment trusts, notwithstanding 2 important considerations:  (i) customer, 2 years earlier, purchased a UIT;  and, (ii) her risk tolerance was conservative, and UITs are not conservative investments.  Customer invested $315,000 in 3 UITs and sold them within 3 months  - at a $36,000 loss that was reimbursed by the firm.  FINRA concluded the RR didn't have reasonable grounds to believe that the UIT recommendation was suitable in light of the customer’s risk tolerance and the resulting concentration of UITs in the customer’s securities portfolio.

    Customer #2.  Invested $603,000 in a UIT recommended by the RR.  Thereafter, the RR sent 2 letters to the customer, in which he stated that the distribution rate for the UIT would be 5.9% for Year One and 6.1% for Year Two.  The letters also stated there would be no penalty for withdrawal at any time.  The letters failed to state that the yield rates were estimated and not guaranteed, and that in fact there was a penalty for selling the UIT within 90 days of purchase.  Customer sold his UIT during that stub period, thereby losing $12,000 that was reimbursed by the firm. 

    Customer #3.  Invested $60,000 in a UIT, as recommended by the RR, even though he had discovered before recommending the investment, that there was a language barrier that might prevent the customer from fully understanding information the RR was about to provide re: the UIT investment.  FINRA found the RR failed to reasonably ensure that the customer understood the features and risks of investing in the UIT. Customer sold a portion of his UIT investment at a loss;  firm compensated customer only for fees he incurred in the sale.

For having allegedly violated NASD Rules 2110 and 2310, the RR was fined $10,000 and suspended 20 days.   [ FINRA Quarterly Review, October ]