by Howard Haykin

13.  LPL Financial Broker fined $7.5K, suspended 20 days.  Negligently made material misstatements in connection with the sale of 20-year interest rate-linked CDs to elderly customers.  [April 2018 - FINRA AWC #2015045703002]

►   Broker misrepresented that their CDs were not subject to any survivor benefit limitations when, in fact, they were subject to material limitation that restricted the aggregate amount of early redemptions.
►   Prior to selling the CDs, broker apparently had not reviewed issuer’s disclosure statement which contained all relevant terms and conditions.
►   When estates of 2 of the customers could not fully redeem their CDs, broker advised remaining customers to sell their CDs in the secondary market.
►   Elderly customers or their estates suffered combined losses of $75,000 on $675,000 of investors.
►   All the customers were made whole.   

14.  Robert W. Baird Broker fined $10K, suspended one year. Recommended an unsuitable strategy involving the consolidation of all of an elderly customer’s assets in a single taxable account without regard to the fact that several of these assets were in tax-deferred accounts or investment vehicles, and other violative conduct.   [April 2018 - FINRA AWC #2015046052701]

►   Broker failed to adequately consider significant losses her client would incur as a result of the tax consequences of this recommendation.
►   Broker did not have reasonable basis to believe that the recommended strategy was suitable for the customer’s investment profile, given customer’s total net worth (<$200,000), dependence on limited income, and need for low reportable income.

►   Moreover, the substantial spike in customer’s taxable income for 2014 resulted in a reduction of her 2016 social security benefit by $264.80 a month. 

15.  Vanderbilt Securities Broker was barred from industry.  Willfully violated Securities Exchange Act and violated FINRA Rule 2020, by churning and engaging in unsuitable excessive trading in the brokerage accounts of a senior customer.  [May 2018 - FINRA AWC #2015045984001]

►   Broker exercised de facto control over customer’s accounts and customer relied on broker to direct investment decisions in his accounts, contacting the broker frequently.
►   After being diagnosed with dementia, broker effected more than 3,500 transactions in the customer’s accounts - resulting in ~$723,000 in trading losses and ~$735,000 in commissions and MU’s or MD’s.
►   Broker never discussed with customer the extent of his total losses or the aggregate amount he paid in sales charges and commissions.
►   This level of trading was excessive and unsuitable for the customer given his investment profile, including his age, risk tolerance, and income needs.
►   The firm and broker settled with guardian by paying $470,000.  

16.  Blackbook Capital Broker fined $5K, suspended 4 months, to pay $14K in restitution. Engaged in quantitatively unsuitable trading in 2 accounts of a customer.  [May 2018 - FINRA AWC #2016047619001]

►   Broker had de facto control over the customer’s accounts - he recommended all trades for the customer’s accounts, the customer followed such recommendations, and never proposed any trades of his own.

►   Customer, who’s now retired, had limited investment experience and conservative investment objectives.
►   Customer’s accounts sustained collective loss of $14,266.  

17.  Legend Securities Broker fined $5K, suspended 3 months, and required to complete 10 hours of CE training.  Failed to have a reasonable basis to recommend and effect unsuitable Non-Traditional ETF transactions in accounts of senior citizen customers.  [May 2018 - FINRA AWC #2015047602803]

►   Broker’s customers held Non-Traditional ETFs for periods as long as 531 days, even though these NT ETFs were intended as short-term trading vehicles.
►   Broker lacked a sufficient understanding of NT ETFs and did not understand their true risks to these and cusetomers.

►   Customers collectively invested over $177,000 and lost approximately $42,000.  

These cases were reported in FINRA Disciplinary Actions for April and May of 2018.

For details on any case, go to ...  FINRA Disciplinary Actions Online, and refer to the Respective AWC Number.