FINRA Suspends Broker for Unsuitable Investment Advice

FINRA suspended a former broker for recommending unsuitable investments to retail clients. 

According to the AWC, during the relevant period, the broker recommended that two customers invest heavily in speculative, unrated corporate bonds. FINRA determined the bonds were high-risk, illiquid securities that "were only suitable for persons with substantial financial resources and with no need for liquidity." FINRA said that one customer ended up with "at least 96%" of their net worth invested in the bonds, while the other had "at least 35%" invested. 

FINRA found that the broker’s recommendations were "not suitable," given the customers’ financial profiles, which included "moderate risk tolerance," "investment objective[s] of balanced growth," and relatively modest income and net worth. FINRA noted that the relevant period pre-dated Regulation Best Interest. 

FINRA determined that the broker violated FINRA Rule 2111 (“Suitability”) and Rule 2010 (“Standards of Commercial Honor and Principles of Trade”). 

To resolve the matter, the broker consented to a five-month suspension from associating with any FINRA member in any capacity, a $10,000 fine and disgorgement of $8,280 plus interest.