Firm Fined for Unsuitable Recommendations to Seniors

A firm settled FINRA charges for failing to supervise recommendations to purchase high-risk alternative investments made to retail customers.

According to the AWC, the firm failed to reasonably supervise recommendations to six customers of investments in high-risk limited partnership interests associated with an alternative investment firm.

FINRA found these recommendations unsuitable, as five of the customers, all seniors, ended up with over 30 percent of their net worth concentrated in these illiquid securities. FINRA stated that the firm's own guidelines restricted alternative investments to 30 percent of an investor's net worth. FINRA found that, despite the red flags apparent in the suitability paperwork, the firm failed to investigate further to ensure the investments were appropriate based on the customers' conservative or moderate risk profiles.

FINRA determined that the firm's actions violated FINRA Rules 3110 ("Supervision") and 2010 ("Standards of Commercial Honor and Principles of Trade").

To settle the charges, the firm agreed to (i) a censure, (ii) pay a $110,000 fine and (iii) partial restitution totaling $20,382.39 plus interest.