FINRA punishes brokers for making unsuitable trade recommendations to investors, but investors likely need a private attorney to recover the losses with such brokers. Please call us at 303-300-5022 for more information. Below are recent actions by FINRA concerning brokers who have been punished for making unsuitable trades:
FINRA suspended Kyle Back, a securities broker in Blacklick, Ohio, for five months for unsuitable trades he recommended for his investors’ accounts. Without admitting or denying the findings, Back consented to the suspension and to the entry of findings that he engaged in “a pattern of unsuitable short-term trading of mutual fund and front-loaded unit investment trust (UIT) transactions.”
Mr. Back recommended the purchase of mutual fund and UITs and the subsequent sale of these products within a year of purchase. Both are front-loaded products (the mutual funds were A shares) intended to be held long term. The front end load means that there are significant costs up front that are lost if the investments are traded quickly.
As the release from FINRA has stated, “Within the accounts, the mutual fund share positions sold within a year of purchase resulted in a net loss to customers of $4,849. Similarly, the UIT positions sold within a year of purchase resulted in a net loss to the customers of $117,457.” While the investors were losing money, the investments were benefitting Back. The transactions resulted in approximately $46,718 in commissions to Back. Back failed have a reasonable basis to believe that the short-term trading of these front-loaded products were suitable for customers.
Likewise, Matthew John Davis, a stockbroker from Murrieta, California, was barred from association with any stockbrokerage firm. Without admitting or denying the findings, Davis consented to the sanction and to the entry of findings that he refused to appear for FINRA on-the record testimony regarding allegations that he engaged in misconduct in several customer accounts, including conversion, misrepresentation of customer holdings and account values, forgery of account related documents, discretionary and/or unauthorized trading, efforts to settle a customer complaint away from his member firm, and unsuitable recommendations.