Stuart L. Pearl, of Deerfield, Illinois, a stockbroker formerly employed with Ameriprise Financial Services, Inc., is the subject of a $7,500.00 fine, and has been suspended from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon allegations that he exercised discretion in customer accounts and made unsuitable margin-based investment recommendations to a customer. Letter of Acceptance, Waiver and Consent, No. 2015046329201 (Oct. 9, 2017).
According to the AWC, on May 14, 2015, discretion had been exercised by Pearl in the liquidation of six of a senior customer’s securities for about $20,000.00. Apparently, the transactions had been permitted by Pearl, but there was no discussion that Pearl engaged in with the customer regarding the transactions on the day in which Pearl effected them.
The AWC revealed that there was no authorization in writing provided to Pearl by the customer, and his firm had not considered the investment account as approved for purposes of discretionary trading. Consequently, Pearl’s conduct was found by FINRA to be in violation of Rules 2010 as well as NASD Rule 2510(b).
In addition, FINRA referenced that Pearl made unsuitable investment recommendations to customer MD and JD – retired customers in their seventies who established accounts with Pearl in June of 2010. Apparently, MD and JD were conservative-to-moderate investors with objectives for investing in growth and income type securities.
The AWC revealed that the customer’s account documentation confirmed that no securities were to be purchased on margin. However, in September of 2011 and March of 2012, recommendations were made by Pearl for MD and JD to buy $122,000.00 worth of four securities on margin. Apparently, the customers went from having no margin debt balance to having a substantial debt balance in comparison to the customers’ available investable assets. The customers were then subject of seven margin calls from September of 2011 to March of 2012.
FINRA found that Pearl made unsuitable investment recommendations relating to the customers’ securities purchases on margin based on the customers’ needs, financial circumstances, and tolerances for risk. Consequently, FINRA found that Pearl’s conduct was violative of FINRA Rules 2010 and NASD Rule 2310(a).
FINRA Public Disclosure reveals that Pearl has been subject of three customer disputes regarding allegations of his improper conduct during the time that he was associated with Merrill Lynch, Pierce, Fenner & Smith Inc., Ameriprise Financial Services, Inc., Citigroup Global Markets, Inc., and Morgan Stanley Smith Barney LLC. Particularly, on February 12, 2013, a customer initiated investment related complaint regarding Pearl’s activities was resolved for $55,000.00 in damages based upon allegations of improper margin use and unauthorized equity trading.
Subsequently, a customer initiated investment related arbitration claim involving Pearl’s conduct was settled for $60,000.00 in damages based upon allegations including breach of contract, negligence, breach of fiduciary duty, and failure to inform the customer about the risks of investing in equities. NASD Arbitration No. 02-07487 (Apr. 28, 2004). Further, on December 11, 2013, a customer initiated investment related arbitration claim concerning Pearl’s activities was settled for $95,000.00 in damages based upon allegations that Pearl failed to consult with the customer prior to effecting trades in the customer’s investments account, traded on an excessive basis, and made unsuitable investment recommendations to the customer.
Pearl was fired by Ameriprise Financial based upon effecting discretion in the customer’s account in violation of the firm’s policies. Since July 10, 2015, he has been employed with David A. Noyes & Company.
Guiliano Law Group
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