A Registered Principal in Kamuela, Hawaii accepted a $30,600 fine and a one-year suspension from the industry to settle FINRA charges he induced liquidity-poor customers to borrow against their home equity and invest those funds into questionable securities. 

Based on Schrufer’s recommendations, customers took “cash out” mortgages and invested hundreds of thousands of dollars in securities, for which Schrufer received advisory fees and commissions of approximately $15,300.  The Principal disregarded the fact that his customers disclosed to him that they lacked the funds necessary to purchase the securities Schrufer recommended without liquefying their home equity, and that they had insufficient assets and income to cover the monthly mortgage payments without the uncertain returns from the investments Schrufer recommended.

Though he assured the customers that the investments would generate enough income for them to make their monthly mortgage payments, the Principal knew there was a risk that the investment returns might not be sufficient.  This is FINRA Case #2008013198902.   [March Disciplinary Actions]