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Regulatory Sanctions

WWW: Broker Fleeces Retirees While Supervisors Were … Where?

April 7, 2017

[Photo: by DullHunk (Duncan Hull) / Flickr]


Retail brokerage requires daily, weekly and monthly supervision.  That’s just the nature of the business, where different risks are exposed at different times and through different reviews – notwithstanding the fact that technology takes the legwork out of supervision, so that many types of reviews can be done at just about any point in time. That said, at least in the days of so-called ‘manual reviews’:

  • Suitability typically would be detected in daily reviews of transactions.
  • Undue concentrations typically would be detected in weekly or monthly reviews of accounts.  


And for all intensive purposes, such “red flags” are what we might refer to “LOW HANGING FRUIT.” Relatively easy to detect, investigate and resolve. So when reading a FINRA AWC that involves such types of ‘abuse’, our first inclination is to ask: where wase the firm? its supervisors? And what sort of protection was out there for retail clients, particularly those who are old and retired?


Hopefully, FINRA - as a line of defense - can manage to get some sort of compensation for the affected clients from ANY OR ALL of the responsible parties.



In December 2016, a FINRA Hearing Officer issued a default judgment against Christopher Ariola, a former registered rep with Bay Mutual Financial. Ariola was barred by FINRA from the industry and ordered to pay $157,000 in restitution and prejudgment interest for losses his elderly customers incurred on unsuitable recommendations investments.


The Hearing Officer also noted that Ariola had obtained access to a former customer’s retirement account at TD Ameritrade while he was still associated with Bay Mutual. Ariola traded in that outside account on the customer’s behalf – though he never told his employer, Bay Mutual, about this outside relationship, and he never told TD Ameritrade about his registered status with Bay Mutual.


ABOUT THE RESPONDENT.    Christopher Ariola, who got his Series 7 license in 1997, worked at Dean Witter, Equity Trust Advisors, Prudential Securities, and Wachovia Securities before joining Bay Mutual Financial in 2004. He remained with Bay Mutual until 2012, when he joined Financial Telesis.


FINRA’S FINDINGS AGAINST ARIOLA.    The investigation of Ariola started after FINRA received a Form U5 filed by Bay Mutual stating he (Ariola) had been permitted to resign when he was under an internal review initiated because “the Firm developed concerns that certain securities recommended for client accounts were not consistent with Firm guidelines."


Ariola made unsuitable recommendations to elderly retirees to invest a substantial portion of their limited retirement assets in certain high-risk gold and energy stocks. These recommendations were unsuitable given the customers’ financial circumstances, and investment objectives and low risk tolerances. The recommendations also caused the customers’ accounts to be unduly concentrated in gold and energy stocks. Ariola made similar unsuitable recommendations with respect to a former customer’s retirement account at TD Ameritrade that he controlled on the former customer’s behalf.


Ariola presumed these investments would throw off high yield dividends - and apparently preferred to look past the significant investment risks, given the fact that the some of these stocks were negatively impacted by corporate events or announcements shortly before Ariola made the recommendations. 


  • Customers 1 and 2 were married and had retired from their jobs as bus drivers in 2010. Ariola recommended that the couple each invest in 9 gold and energy stocks. Between them, they lost $93,000.
  • Customer 3 – also a retired bus driver – was advised to buy 12 gold and energy stocks. This customer lost $45,000.
  • Individual 4 - also a retired bus driver - was a former customer who opened the online brokerage account at TD Ameritrade. Over a 2-1/2 year period, Ariola executed 863 securities transactions in this account, which netted the customer about $5,000 in losses. The customer recouped his losses in a settlement with Bay Mutual.


This case was reported in FINRA Disciplinary Actions for March 2017.

For details on this case, go to … FINRA Disciplinary Actions Online, and refer to Case #2012034139101.