Christopher B. Ariola, of Aliso Viejo, California, a stockbroker with Bay Mutual Financial, LLC, was charged by Financial Industry Regulatory Authority (FINRA) Department of Enforcement in a Complaint alleging that Ariola made unsuitable recommendations to investors. Department of Enforcement v. Christopher B. Ariola, No. 2012034139101 (Aug. 25, 2016).
According to the Complaint, between December of 2011 through July of 2012, when Ariola was a stockbroker for Bay Mutual Financial, LLC, he made recommendations to elderly investors to place a significant amount of their retirement monies in energy and gold stocks. FINRA claimed that investors did not have the financial risk tolerance or investment objectives that allowed Ariola’s recommendations to be suitable.
The Complaint stated that Ariola was primarily responsible for conducing meetings to educate investors concerning their decisions with investments in their defined contribution and deferred compensation plans, as both plans offered investors with various investment options in mutual funds. Apparently, Ariola went from recommending conservative investment funds for investors to recommending that investors place a large portion of their investments into risky stocks which produced high-yield dividends.
Just prior to his recommendations to customers SH, LH, and DS, one of the issuers of stock, James River Coal, had received negative ratings from credit rating agency, Moody’s. Additionally, another investment recommendation of Hugo Royalty Trust was made to SH, LH, WF, and DS, when just prior to such recommendation, such entity reported that it would be required to pay nearly $30,000,000.00 as a result of a litigation settlement. FINRA noted that Ariola made such recommendations regardless of the risk posed by such entities.
The Complaint indicated that in addition to the three elderly customers who were subject to Ariola’s recommendations, a fourth investor whose assets Ariola controlled was also subject to like misconduct. FINRA claimed that Ariola’s recommendations led the affected investors to bear an estimated $140,000.00 in investment losses. FINRA claimed that Ariola’s conduct was violative of FINRA Rule 2010 as well as NASD Rule 2310.
The Complaint additionally alleged that between December of 2009 through July of 2012, Ariola controlled a former Bay Mutual Financial customer’s accounts held at TD Ameritrade. Ariola reportedly traded securities on the customer’s behalf; however, he never provided Bay Mutual Financial written notification regarding such, nor did he notify TD Ameritrade concerning his registration with Bay Mutual Financial. FINRA claimed that Ariola’s conduct in this regard was violative of FINRA Rule 2010 as well as NASD Rule 3050(c).
Public disclosure records reveal that Ariola has been subject to six disclosure incidents. On August 9, 2012, Ariola was subject to a customer dispute, in which the customer requested $100,000.00 in damages associated with unsuitable investment recommendations which caused investment losses. On August 27, 2012, Ariola was terminated from Bay Mutual Financial due to the aforementioned customer complaint and for unauthorized loan arrangements being made with a customer.
On May 1, 2013, Ariola became subject to another customer dispute, in which the customer is claiming $109,000.00 in damages after alleging to have received unsuitable investment recommendations by Ariola. On May 8, 2013, Ariola became subject to yet another customer dispute in which the customer requested $490,000.00 in damages resulting from misrepresentations, negligence, and breach of fiduciary duty.
On February 12, 2014, Ariola became subject to a pending customer dispute, in which the customer requested $45,982.00 after alleging that Ariola engaged in unauthorized transactions in the customer’s investment account.
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