Christopher B. Ariola, of Aliso Viejo, California, a stockbroker with Bay Mutual Financial, LLC, was barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity per an Office of Hearing Officers’ Default Decision containing findings that Ariola made unsuitable recommendations to investors. Department of Enforcement v. Christopher B. Ariola, No. 2012034139101 (Dec. 6, 2016).
According to the Decision, from December of 2011 to July of 2012, during which point Ariola was a stockbroker for Bay Mutual Financial, LLC, he made investment recommendations to elderly customers which consisted of placing a substantial amount of their retirement funds in energy and gold stocks. FINRA found that the elderly investors’ risk tolerance or investment objectives did not justify Ariola’s recommendations.
The Decision stated that Ariola conducted meetings with investors, in which he spoke with them about investing in various mutual funds within defined contribution and deferred compensation plans. Ariola evidently recommended conservative investment funds for investors, but changed his position to recommending that customers invest largely on a speculative basis in high-yield dividend based products.
The Decision indicated that prior to Ariola’s James River Coal stock recommendations to customers SH, LH, and DS, the issuer received negative ratings from Moody’s. In addition, Ariola made another investment recommendation to customers SH, LH, WF, and DS, concerning Hugo Royalty Trust, even though prior to such recommendation being made, Hugo Royalty Trust issued a report that it would be liable for a $30,000,000.00 payment pursuant to a lawsuit settlement. FINRA stated that Ariola made such investment recommendations without taking into account the risk which had been posed by the issuers to the investors.
Additionally, The Decision stated that Ariola controlled the investment accounts of a fourth customer, who had also been mistreated by Ariola. Ultimately, The Decision revealed that Ariola’s recommendations caused investors to collectively suffer $140,000.00 in investment losses. As such, FINRA found that Ariola’s conduct in this regard was violative of FINRA Rule 2010 as well as NASD Rule 2310.
The Decision further stated that between December of 2009 and July of 2012, Ariola exercised control over the accounts of a former Bay Mutual Financial customer that held accounts at TD Ameritrade. Evidently, Ariola traded securities on behalf of the customer, despite not notifying Bay Mutual Financial in writing as required. Further, Ariola reportedly failed to notify TD Ameritrade regarding his registration with Bay Mutual Financial. FINRA found that Ariola’s conduct in this regard was violative of FINRA Rule 2010 and NASD Rule 3050(c).
Public disclosure records reveal that Ariola has been subject to six incidents concerning allegations of misconduct. On August 9, 2012, Ariola became subject to a customer initiated investment related arbitration action, in which the customer requested $100,000.00 in damages based upon allegations that Ariola made unsuitable investment recommendations to the customer, which caused the customer to bear investment losses. On August 27, 2012, Ariola’s registration was terminated from Bay Mutual Financial based upon allegations that Ariola was subject to a customer arbitration, and took part in unauthorized loan arrangements with a customer.
Additionally, on May 1, 2013, Ariola became subject to another customer initiated investment related arbitration claim, in which the customer requested $109,000.00 in damages based upon allegations that Ariola made unsuitable investment recommendations. Subsequently, on May 8, 2013, Ariola became subject to another customer initiated investment related arbitration action in which the customer requested $490,000.00 in damages based upon allegations against Ariola of misrepresentation, negligence, and breach of fiduciary duty.
Further, on February 12, 2014, Ariola became subject to a customer initiated investment related arbitration action, in which the customer requested $45,982.00 in damages based upon allegations that Ariola effected unauthorized transactions in the customer’s account.
Following Ariola’s termination from Bay Mutual Financial, LLC in September of 2012, he became registered with Financial Telesis Inc. from November of 2012 to September of 2014.
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